The Coles Group Ltd (ASX: COL) share price is down amid news relating to higher wage costs.
You may have already seen that the Australian minimum wage has gone up by 5.75% in the latest minimum wage increase.
But, today Coles announced that its wage remediation costs have just jumped up considerably.
Fair work proceedings
Three years ago, the company announced that it is conducting a pay review into arrangements for all salaried team members covered by the general retail industry award after identifying “shortfalls in the remuneration of salaried managers in retail businesses.”
Coles said that it actively sought to address the issues based on available information and conducted a “remediation exercise.”
The company said that it expressed its “deep regret and apologised to affected team members.”
Coles noted that a class action and a separate proceeding by the Fair Work Ombudsman were commenced in the Federal Court regarding the “alleged underpayment of salaried managers in Coles’ supermarkets, and the interpretation of the GRIA and the Fair Work Act.”
The company said that it’s continuing to work “diligently”, in relation to the issues raised.
After “further consideration of the issues as they have evolved”, it intends to “conduct a further remediation” relating to the “reconciliation of available records of the days and hours of work of salaried supermarket managers.”
Coles again said that it “apologises unreservedly to affected team members.”
What’s the cost?
The ASX share said that the additional cost of the extra remediation is $25 million.
Coles said that “in relation to other matters, including the interpretation of the GRIA and Fair Work Act, Coles awaits the Court’s decision on these complex issues.”
Final thoughts on the Coles share price
It’s down 1.6%. The higher costs for employees does hurt the profit, but it could also mean that some customers have more money to spend at the supermarket.
I think Coles could be the better value supermarket to buy right now, partly thanks to its better dividend yield. The company could see steady growth of its earnings in the coming years, so I think it’s an interesting defensive play.