Minimum wage increase to hurt retailers

Money, dollar, notes,pay, wagesIndependent retailers will be hardest hit by the Fair Work Commission’s decision to lift minimum wages by 2.5 per cent a week in the next financial year.

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As from the first full pay period after July 1 2015, wages under the General Retail Industry Award (GRA) will rise by 2.5 per cent a week.

They will go up from $18.52 to $18.99 per hour to $721.50 a week, before penalty rates are added.
According to the Australian National Retailers Association (ANRA), the decision will affect around 370,000 retail workers (or 30 per cent of the retail workforce) currently on the GRA 2010.

Australian Retailers Association (ARA) executive director, Russell Zimmerman, said many of the big retailers were on enterprise bargaining agreements and might not be directly affected as they would have an automatic ratchet-type clause that went up a certain per cent each year.

“However, they must always pass what is known as the ‘better or over’ test. If they don’t, they may have to do something about it,” Zimmerman said.

“But smaller independent retailers will definitely be affected by this as their employees are covered by the GRA, or awards for food or restaurant and catering workers.”

The ARA boss said his main concern is that a lot of smaller independent retailers are already suffering and finding it very difficult to make ends meet. Increases in wage costs are only going to exacerbate their pain.

“Many tell us that they are not making a profit at the moment. It’s not just about this increase; it’s about penalty rates and loadings for Saturdays or after hours or public holidays. Once the increase comes through, those other rates, which are a percentage of the basic rate, will also go up. It is a huge burden. I believe that retailers will start looking at costs and either reduce the hours of casual or parttimers or do without some employees. The increase could lead to cuts in hours and possibly job cuts.”

To cut costs, Zimmerman suggested that retailers consider whether they needed that many staff on at the beginning or end of the day and to ensure they were using their staff to their maximum capacity.

The ARA advocated a rise of $5.70 a week while the ANRA pushed for $9.00 per week.

The Australian Council of Trade Unions wanted a $27 a week hike, while other business groups lobbied for a rise between $5.70 and $10.25.

Master Grocers Australia CEO, Jos de Bruin, said the increase would be challenging for members.

“Wages costs continue to rise and are the biggest cost for our members to do business,” Bruin.

“This, coupled with theburdensome Sunday penalty rates, is proving to be challenging for independent supermarket owners, liquor stores and other independent retailers around Australia.”

National Retail Association (NRA) CEO, Trevor Evans, believed the rise did not reflect the reality of employment and business conditions for Australian retailers.

“At a time when the Australian retail industry is only just returning to average sales growth on the back of a long period of incredibly challenging times, the increase will only hinder businesses,” Evans said.

“Australian business owners are already dealing with some of the highest wages in the world, in addition to irregular shop leasing agreements, which vary from stateto state, causing confusion and adding unnecessary costs and regulatory burden to retailers. Many businesses will be held back from increasing staff numbers or hours, amid the often unavoidable tradeoff between jobs and wage increases that aren’t strongly linked to productivity or efficiency gains.”

Similarly, ANRA CEO, Anna McPhee, feared the increase was higher than what manybusinesses could absorb.

“In the current environment of lower business confidence, the increase could slow job creation,” she said. “As an employer of more than 1.25 million Australians and top 10 contributor to Australia’s Gross Domestic Product, the Fair Work Commission decision can have a sizeable negative impact on the retail sector’s capacity to grow, invest and create more jobs.

This story first appeared in Inside Retail PREMIUM issue 2048. To subscribe, click here.

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