Kmart today employs over 28,000 people, and the rights and responsibilities of these staff members are set out in the Certified Agreement between SDAEA and Kmart Australia Limited.
The aim of this report is to analyse this Certified Agreement, in respect to hours of work, hourly rates of pay, penalty and overtime conditions, and annual leave entitlements.
To assist in this analysis, two Certified Agreements will be utilised. The 1998 Agreement, set on the 24th June, will be reviewed and compared with the 2001 Agreement, set on the 18th July.
In particular, the differences between the two Agreements will be analysed in terms of their impact on both the employees and on the employer. Kmart employs full-time, part-time and casual staff, so these groups have been reviewed independently to show any differences.
It took approximately six weeks to negotiate the 2001 agreement with Kmart and its employees, which is a fairly short period of time considering the importance of the decisions.
The 1998 Certified Agreement was compared to the 2001 Certified Agreement in regard to five key allowable matters. All comparisons were based on a Level One Retail Assistant.
Rate of pay was analysed first, as it sets the scene for employee rewards and the extent to which they exist. Trading hours were also reviewed, as a measure of business success and of the change in demands of the employer. Lastly, ordinary maximum hours of work, penalty conditions and annual leave entitlements were also compared, to see whether any distinct changes had occurred.
The differences between the 1998 Agreement and the 2001 Agreement are set out in Table 1.1.
Table 1.1 Changes between the 1998 & 2001 Certified Agreements
1.2 An Overview of the Changes
There are three key changes between the 1998 and 2001 Agreements.
There has been a minimal increase in pay for full-time and part-time staff (1.1% per year), Saturday trading hours have been extended by 2 hours, and the required number of hours that need to be worked before penalty rates apply has increased for both full-time and part-time staff.
For the employees, the pay increase means greater financial rewards for doing their job. This pay increase would have no doubt been greatly appreciated. However, for the employer, this pay increase would also have been welcomed, because it is only a slight increase when compared to Kmart’s growth in sales revenue. Kmart is savings money by not having to pay their staff a higher rate.
The extension of business hours has different implications for employees and for Kmart Australia Limited. For the employer, this increase in operating hours means additional labour costs, however it is also likely to result in higher sales. For it to be worthwhile to retain these extended trading hours, Kmart needs to calculate the additional profit (or loss) incurred. For casual staff, the increase in operating hours means a greater chance to work and earn income. However, for full-time or part-time staff, the extension of trading hours means that they can now be rostered to work until 10pm on a Saturday (where previously they were only required until 8pm), but they will not receive any additional pay for working late, nor are they able to refuse to work these hours.
The increase of required hours before penalty rates apply basically makes it near impossible for staff to receive over-time wages. For Kmart, this means that their labour costs are minimised as they are seldom required to pay their employees at penalty rates. For full-time employees, this change means that they must now work at least 8 hours over and above their standard 40 hours of work per week before they receive an over-time rate. For part-time employees, this means that they must work at least 4 hours over and above their 140 hours per 4-week cycle before they receive a higher rate.
Casual staff does not receive penalty rates, but are paid a wage rate with a 20% loading to account for this. There has been no change in the conditions of casual employees.
1.3 Critical Analysis
The pay increase of 1.1% per year is very small over three years. Standard cost of living increase is approximately 5%, and many landlords use this figure for adjusting rent for their tenants. Many companies also use this figure for annual pay adjustments for their staff.
One would expect that Kmart would also increase its retail prices approximately 5% each year, which would, in turn, increase their total sales figure. If Kmart has only increased its staff’s wages by 1.1% per year, this leaves the other 3.9% to add to Kmart’s profit, instead of rewarding their employees. This increase is not relative to cost of living.
As Kmart is a wholly-owned subsidiary of Coles Myer Limited, one would expect for wage rates to be standardised across their companies. In Myer Grace Brothers, Target and Kmart, as they are all department stores, ideally their staff are all doing a very similar job, so standardised wage rates would seem a logical outcome. However, surprisingly, this does not apply. It seems as though Kmart has applied their ‘lowest price guaranteed’ promise to labour prices as well. At Kmart, a full-time Level One Retail Assistant earns $497.50 per week, almost $15.00 less than Myer employees, who earn $511.00 per week. Target employees earn a higher weekly wage again, approximately $520.00 per week.
1.4 Conclusion
There were three main differences between the 1998 and the 2001 Agreements- an increase in Saturday trading hours, an increase in full-time and part-time wages by 6.7% (1.1% per year), and an increase in the hours required before penalty rates are applicable.
Looking at these changes, it is clear that Kmart is the obvious winner over the employees. The increase in trading hours means that Kmart has greater potential to increase its profits, and although staff labour costs are increased with the additional operating hours, this costs is only small relative to increased sales revenue.
The Agreement also allows managers to keep their labour costs to a bare minimum, firstly by paying their employees a low rate, and secondly by minimising the chance of having to reward penalty rates to employees. Although the employees have benefited from their pay increase, this increase is not fair. As cost of living increase is approximated at 5% per year, annual pay increases should be closer to this figure. The new policies for penalty rate and overtime payments are certainly not fair for the employees.
Although the changes in the 2001 Certified Agreement will reduce labour costs for Kmart Australia Limited, some negative outcomes will also arise. The lack of rewards for staff and poor conditions are likely to lead to lower productivity, lower staff morale and higher staff turnover.
1.5 Recommendations
If Kmart and its managers want to continue to reduce costs in order to maximise profit, there are several possible avenues they could explore.
When negotiating the next Certified Agreement, Kmart could further increase ordinary hours for full-time and part-time staff so that less money is spent on casual wages.
Kmart could also continue to keep their wage increases very low so that their increase in profits far outweighs their increase in labour costs.
On the other hand, if employees at Kmart have the power to push for better conditions in their next Certified Agreement, there are many reasonable demands that they could put forward.
The employees need to negotiate a higher annual pay increase, at or above CPI, which rose 2.4% between December 2002 and December 2003 (Australian Bureau of Statistics website).
Employees need to amend the penalty rate conditions so that overtime is owed automatically outside ordinary working hours. If managers continue to demand the existence of a higher over-time threshold, then the employees ordinary pay rate needs to be increased to compensate for this.
Lastly, and most importantly, employees need to make sure that none of their current benefits are lost as a trade-off for better wages or conditions.
1.6 References
Australian Bureau of Statistics, year, title of report, cat. no (catalogue number) xxx, ABS, Canberra.
Coles Myer Limited, 2004, Annual Report, Pricewaterhouse Coopers, Melbourne.
Coles Myer Limited, 2004, viewed 4 April 2004, http://www.corporate.colesmyer.com/
Kmart Australia Limited, 2001, viewed 5 April 2004, http://www.kmart.com.au/about_kmart/kmart_story/default.html
Word count:
Total = 1919
Table = 379
Net total = 1530
