“We’ve not been persuaded that there are exceptional circumstances such as to warrant a delayed operative date,” said FWC president Iain Ross in his decision.
“We acknowledge that…some businesses covered by these Modern Awards will face two minimum wage increases within a 12-month period, but those businesses have also had the benefit of a delayed operative date arising from last year’s decision.”
The FWC’s decision was made based on the fact the increase will largely target the lowest paid employees in Australia, and that other factors, such as an inflation rate of 5.1 per cent driving up the cost of food, petrol and housing, and an incoming bump in the Superannuation Rate Guarantee to 10.5 per cent, were also taken into account.
Industry submissions fell between several bodies asking for no increase at all, to some trade unions pushing for increases of up to 30 per cent to $26 an hour.
Most retailers will be impacted largely by the increase to the Modern Award, which is increasing at a rate between 4.6 per cent and 5.2 per cent depending on the relevant award, but will largely result in a flat $40 increase to a worker’s pay per week.
The decision will roughly cost employers an extra $2000 a year per full-time employee working on a Modern Award or on minimum wage.
For some retailers, such as Coles and Woolworths that employ thousands of people across the country, the total figure will be high.
In response to the decision, a Coles spokesperson told Inside Retail that the business is committed to providing fair remuneration to all of its team members.
“We will review the Fair Work Commission’s Annual Wage Review decision carefully, and our team members will be the first to know of any changes to their pay arrangements,” the spokesperson said.
A Woolworths Group spokesperson also Inside Retail the business will be passing on the pay increases on to its modern award employees at Woolworths Supermarkets and Metro, as well as Big W, and will review its salaried retail team members’ pay.
“We have previously said we support an increase in team members wages that keeps pace with underlying cost-of-living increases, and are committed to doing the right thing.”
This will impact more than 145,000 team members at Woolworths Group.
Wage increases to “lead to job losses”
The National Retail Association (NRA) slammed the decision, which represents thousands of shop fronts around the country, as “out of touch” with the financial pressures most businesses are currently under and will result in job losses.
“The simple fact is that when businesses don’t have enough money to cover their expenses, they need to cut costs. There is no doubt that those cuts will lead to job losses in retail,” Lamb said.
Lamb also said that the NRA, which pushed for a modest increase of no more than 3 per cent, believes the FWC paid its concerns “no attention” and “simply listen[ed] to only one side of the argument.”
“Sadly, it seems this reasonable attempt at finding sensible middle ground has backfired,” Lamb said. “It may be time for employers to stop trying to be reasonable.”
Queensland University of Technology Professor Gary Mortimer told Inside Retail the increase would help more families make ends meet, but that small businesses in particular should be concerned.
“There are going to be some challenges moving forwards for smaller retailers, cafes, and the like,” Mortimer said.
“Ultimately, we may find this decision may mean smaller businesses will be forced to raise their prices even higher in order to cover these increasing labour costs.”
Likewise, Harrier Talent Solutions’ chief customer officer Richard Wynn told Inside Retail the pay raise was going to be a double-edged sword.
“$40 in [an employee’s] hand is a great result for them,” Wynn said.
“It could be argued that an increase in the minimum wage will continue to fuel spending , but it could also be argued that if the business that employ these individuals go out of business, there will be no spending at all.
“Big businesses that that can afford this substantial jump will continue to prosper, but SME’s will now have to reflect on and reconsider their individual hiring activity in the midst of this additional burden.”
The Australian Retailers’ Association (ARA) chief executive Paul Zahra agreed, stating that while the ARA supports an increase to the minimum wage, the scale of the change could put some businesses under increased pressure.
“Our economic recovery is uncertain, and with interest rates on the rise and families set to tighten their household budgets, consumer spending is likely to slow in the months ahead posing more challenges for discretionary retailers,” Zahra said.
“Acute supply chain issues, staff shortages and the rising cost of energy, fuel and materials is creating unprecedented financial pressure [on businesses].”
“Real wages have been stagnant for a decade”
On the other side of the fence, the Australian Council of Social Services acting chief executive Edwina MacDonald welcomed the increase, stating the bump in pay will help frontline workers and reduce the pay gap between men and women substantially – with 55 per cent of low-paid, award-reliant workers being female.
“Real wages have been stagnant for a decade,” MacDonald said.
“They can, and should, be increased substantially, at least to compensate for inflation, without triggering a wage price spiral or higher unemployment.”
Likewise, the Business Council of Australia chief executive Jennifer Westacott said the increase was welcome, but said that Australia must get to work building a stronger economy to keep inflation low and living standards high.
“We must lift record low business investment, because that’s what drives companies to do new things, expand and innovate. There’s no silver bullet – we need to address critical labour shortages, build up skills [and] make it easier to do business in Australia,” Westacott said.
“Many of the global economic headwinds are outside our control, and that’s why we need to double down on the things we can control. We need a pathway to sustained wages growth fuelled by productivity.”