The struggling discount department chain, which could become the next Woolworths’ asset to be sold, has not been paying any Saturday penalties or the full 25 per cent casual loading for several years.
An analysis by The Australian Financial Review suggests, on a conservative roster mix, Big W’s workforce of 16,000 casuals and part-timers are now missing out on an average $2000 a year compared to what they would earn under the retail industry award.
The chain is expected to soon reach a new EBA that will restore full award rates but the deal could set off cost increases of between $30 million and $40 million in its first year, even without annual wage increases.
The expected hit comes as the chain has been underperforming in sales, reporting $110 million in losses last financial year, and was expecting a turnaround in 2019 when Woolworths group will review its fate.
But its wages gap is likely to be even greater than for Wesfarmers rival K-Mart or Woolworths supermarkets, which both have a buffer from paying higher weekly rates.
Pay rates drop below award minimum
Unlike Woolworths, Big W pay records reveal it is paying its permanent workforce just $20.79 an hour for working Mondays to Saturdays.
The rate is the base minimum in the award and the least Big W is legally obligated to pay when an expired agreement drops below the award.
In 2012, Big W negotiated higher weekly rates in return for reduced loading and penalty rates as part of an EBA with the Shop Distributive and Allied Employees Association (SDA).
But that EBA expired three years ago and minimum wage rises since then mean even the award’s base rates have overtaken the EBA, forcing the chain to grant workers a modest 0.63 per cent pay increase last July.
Part-time and full-time workers are not paid any Saturday penalties, which the award sets at $26 an hour, and receive $31.19 on Sundays compared to the award’s $37.42.
The situation is worse for casuals, who are paid below the award on weekdays and weekends.
Big W pays casuals a 20 per cent loading in lieu of permanent entitlements, less than the award’s 25 per cent, and they receive $24.29 on Saturdays and $35.34 on Sundays compared to $28.07 and $38.46 on the award.
Using broadly representative sample rosters from Coles and a breakdown of Big W’s workforce from 2012, The Australian Financial Review estimates the wage gap for the chain amounts to $40.4 million in labour costs.
Casuals are the worst paid under this analysis, with those working weekends and weekdays paid an average 23.8 per cent below the award over a four-week cycle.
Part-timers working a similar roster mix are paid an average 12 per cent below the award.
The total cost is qualified to the extent that it doesn’t account for higher gradings, evening penalties and a decline in Big W’s workforce of about 3000 workers due to store closures. With the decline, Big W is looking at an estimated $33.7 million in extra costs.
Big W restarts EBA talks
Big W refused to comment on the estimates. However, a spokeswoman said “Big W is a discount department store and operates with very different shift and roster patterns than supermarkets”.
The difference is understood to be based on supermarkets performing more late night work. However, the Coles rosters do not include late night work and evening penalty rates have not been included in the analysis.
The chain noted that last month it had restarted long dormant negotiations for a new EBA with the SDA and the Retail and Fast Food Workers Union (RAFFWU).
“In the meantime, Big W team members have received discretionary pay increases, and continue to receive a range of benefits not provided under the award,” she said.
“We’re committed to progressing through the bargaining process as quickly as possible, so we can get a new agreement out to our team.”
SDA national secretary Gerard Dwyer said Big W would likely follow Woolworths’ in-principle EBA negotiated last month, which restores full penalty rates and casual loading.
“These Big W negotiations are expected to be dealt with swiftly now that an in-principle agreement is being rolled out to Woolworths Supermarkets employees for consideration,” he said.
“Several SDA claims in this Supermarkets EBA required sign off from the Woolworths Group so these claims will not have to be prosecuted again in the Big W negotiations.”
‘Backpay appropriate’: union
RAFFWU secretary Josh Cullinan said the labour cost increase to Big W will be “substantial” but warned the chain against using the increase to shut down stores or cut hours.
“We expect there will be a cookie cutter approach to returning to minimum conditions but the only question is how they handle any issues with bearing the cost,” he said.
“Implementing a new agreement where wages are increasing but hours are changed and stores potentially shut would be unscrupulous.”
He said “if there is an actual risk to the business or a substantial risk to the employment security of workers, backpay is an appropriate avenue to compensate workers for what they’ve otherwise foregone”.
Woolworths Group has said it will review Big W’s future at the end of 2019, with speculation the chain may be put up for sale if it narrows its losses.
A Citigroup analysis last month identified Big W as one of several threats to forecasts for the Woolworths group, citing a “sustained decline in discount department stores”.
“Big W has been under earning and is under threat from international entrants and leakage to online pure-play competition such as Amazon,” it said.
While analysts have not examined Big W’s labour costs, Credit Suisse recently used the Coles rosters to estimate Woolworths would have to pay $50 to $60 million from its new supermarkets EBA covering 200,000 workers.