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Officeworks Facing $10M Salary Hit To Bottom Line

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New Officeworks CEO Sarah Hunter has already hit a turbulent patch with a $10M boost to take home pays set to hit the Company’s bottom line a problem that is set to impact other retailers as staff demand increased salaries.

The $10 million increase in labour costs is a direct result of new enterprise agreement that will lift store staff wages by between 5 per cent and 15 per cent over the next four years.

Hunter said the new agreement would be a “headwind” for Australia’s largest office supplies retailer but negotiating a new agreement that gave staff more certainty around pay and conditions had been a priority since she took the helm late last year according to the Financial Review.

“Like all major retailers we were paying a version of penalty rates, but it was not in line with the higher penalty rates now expected – this new agreement aligns our penalty rate structures under the General Retail Industry Award,” she said.

Under a new, four-year store operations agreement, eligible store staff will receive a 2 per cent wage increase in above-award base rates for the first two years and a 3 per cent increase in base rates for the last two years.

For the first time in about 10 years, Officeworks will also pay 25 per cent penalty rates on weeknights (between 6pm and 11pm) and on Saturdays and will pay higher penalty rates on Sundays – 65 per cent instead of 50 per cent.

Staff will also be able to choose their superannuation fund and be entitled to two days of paid domestic and family violence leave.

Officeworks staff have voted strongly in favour of the new agreement, with more than 80 per cent of about 6200 store staff participating in the vote and 97 per cent of those voting in favour of the agreement.

Analysts and union leaders estimate the new agreement will increase Officeworks’ labour costs by about $10 million a year.

Hunter added “Like all major retailers we were paying a version of penalty rates, but it was not in line with the higher penalty rates now expected – this new agreement aligns our penalty rate structures under the General Retail Industry Award,” she said.

Officeworks will attempt to offset higher wage costs by streamlining back office processes and free up staff to spend more time serving customers and driving sales growth.

“We don’t have a huge workforce, so our primary focus is to drive our top line – I want my staff on the shop floor serving customers as much as possible,” she said.

The AFR said that Ms Hunter ruled out reducing store opening hours to cut costs, saying many Officeworks customers shopped early in the morning and late at night. Some Officeworks stores are open from 7am until midnight.

She also ruled out changes to store replenishment, saying Officeworks restocked shelves in the morning when there were fewer customers.

Several major retailers such as Woolworths and BIG W are bringing forward replenishment – restocking shelves before 6pm when customers are in stores rather than later at night – to avoid paying penalty rates.

The agreement will be lodged with the Fair Work Commission for approval, but Officeworks will immediately increase the base pay rate by 2 per cent for all team members covered by the agreement.

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