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Woolworths to pass on $40 wage increase but small retailers worried

Woolworths storefront
Woolworths will be passing on the $40 minimum wage increase to its 145,000 staff across Australia. (Source: Getty)

Australia’s largest supermarket chain is set to pass on a $40 pay increase, in line with the Fair Work Commission’s (FWC) decision to lift the country’s minimum wage by 5.2 per cent.

Woolworths, the country’s biggest private-sector employer - with roughly 145,000 staff across Australia - reiterated its stand to support an increase.

“We will be passing on the annual pay increases under the modern award to our hourly paid Woolworths Supermarket, Metro and BIG W retail workers from July and will review for our salaried retail team members,” a Woolworths Group spokesperson said in a statement.

“We have previously said we support an increase in team-member wages that keeps pace with underlying cost-of-living increases and are committed to doing the right thing.”

The FWC announced on Wednesday it had bumped the minimum wage up to $21.38 an hour - or $812.60 for a 38-hour work week - which would kick in from July for 2.7 million workers covered by the minimum employment standards.

This is an increase from $20.33 per hour.

Small retailers worried

While this increase is welcome news for many workers, the FWC decision is a cause for concern for smaller businesses already struggling with their bottom line.

Following the announcement, the Australian Retailers Association (ARA) expressed concern that the increase could tip some businesses over the edge as costs continued to rise.

The ARA, which represents the $360 billion retail sector, said its submission was for the minimum wage to increase by 3.2 per cent.

This, they explained, took into account the “intense cost pressures businesses are under, while ensuring the wages of frontline workers could keep pace with the rising cost of living”.

ARA chief executive Paul Zahra noted the increase, which was double last year’s award, was the highest since 2006 and came in an “incredibly challenging economic environment” for retailers in the country.

“The cost of business is a pressing concern and comes as retailers deal with intense challenges,” Zahra said in a statement.

“Acute supply chain issues, staff shortages and the rising cost of energy, fuel and materials is creating unprecedented financial pressure.

“The Superannuation Rate Guarantee is also increasing from 1 July, which is another cost that businesses have to factor in, on top of the inflationary pressures they’re currently experiencing.”

Zahra said Australia’s economic recovery was “uncertain” and with interest rates on the rise and families set to tighten their household budgets, he expected consumer spending to slow in the months ahead and pose more challenges for discretionary retailers.

“Whilst the ARA supports an increase to the minimum wage for our frontline teams, the scale of this increase from the Fair Work Commission could send some businesses to the brink,” he said.

Female cafe worker handing coffee to customer
The FWC's decision to hike the minimum wage has smaller retailers worried. (Source: Getty)

Yahoo Finance reached out to Coles for comment but had not received a response as of publication.

However, a report by The Australian explained that the grocery chain was in a slightly different situation than Woolworths because it did not have a current EBA in place for supermarket team members.

It can however, pay a discretionary wage hike to lowest-paid workers, although it does need to gain its own board approval for it.

In the report, the spokesperson explained that Coles was committed to a fair day’s pay for its 130,000 workers and would be reviewing the FWC’s decision.

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