September 15, 2017

The recent proposals under Bill 148, also know in Ontario as the Fair Workplaces, Better Jobs Act, 2017, has presented the landscape services industry with major changes to our costs. As a business with long-term contracts, we need to give our clients some indication of how this will affect their costs. We have spent much time discussing and analyzing the effects, and here is what we have come up with.

Let’s look at a 10-employee, grounds maintenance company to illustrate the impact of the changes. Labour cost for a typical landscape maintenance company is about 40 to 60 per cent of revenue. We will use 50 per cent for our model.

Minimum wage increase

The most obvious change to Ontario workplace law is the minimum wage rising from $11.40 per hour to $14 on Jan. 1, 2018, with plans for a second increase to $15 on Jan. 1, 2019. This is a 32 per cent increase. Landscape Ontario’s recent wage surveys showed employees currently earn $14 to $20 per hour on average in Ontario. With minimum wage going up $3.60 an hour, there will likely be upward pressure on other wages. It’s hard to pinpoint the exact increase, and all of it might not be immediate, but it seems reasonable to project average wages increasing $1.50 to $2.50 per hour.

A $2 per hour increase adds 12 per cent to labour costs. The bulk of this impact will be felt in 2018, with maybe a quarter of the impact in year two when the last dollar increase kicks in. So a nine per cent increase in year one and a three per cent in year two.

Without this increase, a technician now making $15.50 an hour (36 per cent more than current minimum wage), would only make three per cent more than minimum wage once set at $15.

On-call pay

New rules around on-call employees will greatly affect the cost of winter workers. In 2019, it will be mandatory to pay a person three hours per day for being on-call, if they have not been called in. Let’s say your region gets 25 snow or ice events a year from late-November to the end of April. Let’s say over these 17 weeks (119 days), that it does snow on 25 days, so for the other 94 it does not. Those 10 employees need to be paid three hours per day for 94 days, a total of 282 hours.

Adding 282 more hours of on-call pay is another 15 per cent increase in wage costs over a full work year. Interestingly, the government suggests in their bulletin that one way to negotiate around this rule is to have a “Collective Agreement” with your employees. I read that as a union which is another story in itself.

Overtime and holiday pay

The government names “special industry rules” that probably refers to the landscape gardening exemption in the Employment Standards Act (ESA). Losing these exemptions could affecting overtime pay and holiday pay.

Some landscape companies currently pay overtime voluntarily, but most do not. Because of the seasonality of the industry and the fluctuating weather, we need to “make hay while the sun shines.” We work long hours, often 55 a week or more. If you were not paying overtime on the 11 hours over 44 hours that an employee works, and now have to pay a 50 per cent premium, that’s equivalent to 5.5 extra hours paid on 55 (50 per cent premium times 11 hours). That’s a 10 per cent increase in wages.

Two paid sick days

If you have to pay two extra, eight hour days (let’s presume these occur in the summer), it will add another 1.25 per cent to your costs.

Statutory holiday pay

There are currently nine statutory paid holidays in Ontario. The government has promised a simpler calculation method than currently exists. Currently, if you only work part-time, you only get statutory pay based on the average hours worked in a five-day week. In winter, during a layoff period, where your employee might only work 12-15 hours a week, they might only get paid about three hours of stat pay for each of Christmas, New Year’s, Boxing Day, Family Day (12 hours). For the other five holidays, they would get paid a full eight hours (40 hours total), which amounts to 52 hours in extra pay a year. With no consideration here for the new on-call rules, this alone is about a 2.75 per cent increase.

Three-weeks vacation after five years

Most of us would consider ourselves lucky to have a five-year employee. If our 10-employee company has three employees in this class, that would add a 0.6 per cent increase to payroll (Two per cent more on a third of your payroll).

What it could cost

In summary, if all proposed changes are passed, here is the impact on payroll for a 10-employee company:

Change 2018 2019
Min. wage increase to $14 9%  
Min. wage increase to $15   3%
Three hours on-call (2019)   15%
Overtime at 44 hours 10%  
Two paid sick days 1.25%  
Holiday pay 2.75%  
Vacation pay (5+ years) 0.6%  
Total 23.6% 18%
In our example, the contractor has a 50 per cent labour cost. Year one he has to charge his clients 50 per cent of the increase, or 12 per cent more, and in year two another 50 per cent, or nine per cent more. Simply multiply your labour cost percentage by the 24 per cent and 18 per cent and you have the impact on your client. Our businesses will vary from one another. Maybe you only work 40-45 hours a week now, or maybe you have a way around the three-hour rule, or maybe you pay so much more than the new minimum wage that you won’t feel upward pressure on your wages when the minimum jumps. For most of us, we and our customers could feel the full impact of these changes, and need to start planning for them now.

On the bright side, perhaps these wage increases are just what our industry needs to bring pay equity with other industries and improve the lamentably poor availability of labour in our industry. Maybe what we have seen so long as cost advantages were actually hindrances to our success.
Jay Murray is owner of TLC Professional Landscaping in London, Ont.