Domino's Pizza faces a wage bill hike of 11 per cent when a new industrial agreement kicks in, investment bank Deutsche Bank says.
Domino's pay practices have come under the spotlight following a Fair Work Ombudsman investigation into alleged underpayment of staff, and a Fairfax Media investigation alleging widespread underpayment of wages and a model that some franchisees allege pushes them to cut corners.
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Domino's subsequently told the market it had audited 102 stores out of more than 600 stores, and found more than 2400 workers had been underpaid and 22 franchisees had been asked to leave the network.
Domino's workers had missed out on penalty rates under an old deal with the Shop, Distribution and Allied Employees Association (SDA).
The deal, struck in 2009 but expiring in 2013, left staff with overall pay rates well below the current legal minimum.
Domino's recently started increasing pay for workers. But the market feared a recent 10 per cent surcharge on orders placed on Sunday to help pay for the increase would crimp orders among Domino's price-sensitive customers.
Domino's has consistently said it was waiting on the Fair Work Commission's ruling on Sunday penalty rates which was handed down on Thursday. It has also flagged a fresh deal with the SDA in the next few months.
The Fair Work Commission ruled on Thursday that full-time and part-time workers in retail will have their Sunday penalty rates dropped from 200 per cent to 150 per cent of their standard hourly rate, while casuals will go from 200 per cent to 175 per cent.
![Domino's audited 102 stores and found more than 2400 workers were underpaid.](/web/20170305193521im_/http://www.smh.com.au/content/dam/images/g/u/k/h/g/0/image.related.articleLeadwide.620x349.gukgrc.png/1487910761366.jpg)
Deutsche Bank told clients on Friday that Domino's "still needs to introduce penalty rates on Saturday and late weeknights and its two-hour minimum shift arrangement is up for negotiation."Â
"Our previous analysis did not make allowance for this change. We previously estimated penalty rates would increase the system wage bill by about 14 per cent, adjusting for this change, our analysis would suggest an 11 per cent increase in the wage bill."
In response, Domino's said it had forecast "another record profit year for franchisees" and it was "one of the best retailers working through this process".
"At this point we forecast that labour as a percent of sales will increase by 1 to 2 per cent as a result of award modernisation, before our strategic initiatives are implemented," a spokesman said.
"Market share gains may be possible, as modernisation places additional pressure on competitors.
"We are confident these initiatives such as ... thickshakes, new product offerings and pricing strategies will not only cover these labour increases, but exceed them."
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