Woolworths wage bill to rise $20m-$30m a year after underpayment fix

Woolworths wage bill to rise $20m-$30m a year after underpayment fix


Sue Mitchell

Woolworths’ annual wage costs will rise by $20 million to $30 million a year as Australia’s largest retailer rectifies underpayments to thousands of salaried staff, analysts say.

This is on top of an estimated $100 million to $150 million increase in wage costs from anew enterprise agreementand will offset about$55 million in wage savings from a new store operating model and job cuts at the head office.

via apinews.org

Woolworths CEO Brad Banducci says the wage underpayments will not be material in the context of the retailer’s total numbers.  Janie Barrett

Woolworths also faces a $200 million to $300 million hit to bottom-line profits this year after revealing on Wednesday it hadunderpaid at least 5700 salaried store staff,including store managers, category managers, department managers and nightfill managers in its supermarkets and convenience stores over as many as nine years.

Woolworths has promised to repay staff their full entitlements, including interest and superannuation, assuming the problem dates back as far as 2010, when the modern retail award came into effect.

The group is also investigating whether salaried staff at other divisions including Big W, Dan Murphy’s and BWS were underpaid. If so, the remediation bill and annual wage costs could rise further.

“Woolworths was already facing higher EBA costs, so this review could put further upward pressure on the group wages bill,” Macquarie Equities analysts said on Thursday.

Analysts cut their full-year bottom-line profit forecasts by about 9 per cent to take into account the one-off remediation costs, which are equivalent to about 0.3 per cent or 0.4 per cent of Woolworths’ market value.

Earnings forecast

Woolworths chief executive Brad Banducci said on Wednesday the wage underpayments would “clearly” lead to increases in salaries but it would not be material in the context of the retailer’s total numbers.

UBS analyst Ben Gilbert and Morgan Stanley analyst Niraj Shah said increased labour costs of $20 million to $30 million a year would reduce group earnings before interest and tax by about 1 per cent.

However, Woolworths will be able to offset higher wage costs by reducing costs in other areas including shrinkage and rostering efficiencies and through strong sales growth.

UBS expects earnings (EBIT) to rise about 5.6 per cent this year to $2.88 billion, boosted by 14 per cent earnings growth in the first quarter, when same-store Australian supermarket sales grew a record 6.6 per cent, pushing total sales up 7.1 per cent to $15.9 billion.

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