The internal communication follows protests on social media and from union groups over the last two weeks calling on the business to pay its staff full penalty rates.

'Significant investment'

Mr Nairn said to deliver a "world-class" customer experience and improve Kikki.k's position as a "great place to work", the company recognised it needed to retain and attract "great people".

"Given that, we believe it's the right decision to not reduce penalty rates from what was in place back when you voted on the EA and it was submitted to the FWC."

The company was named repeatedly as one of BRW's Best Places to Work since 2012 and claimed to offer its staff "inspiring benefits" including a paid day off on their birthday.

However, it was revealed last week that the store in fact contracts out its more than 300 non-managerial employees to labour hire company, Employment Innovations, which engages them on an expired WorkChoices agreement that pays no penalty rates for weekends or public holidays.

Mr Nairn said Kikki.k had outsourced its labour because the business "differs from most retail businesses [in that] our sales peak and trough significantly throughout the year and with this brings the need for flexibility in resourcing to best meet the needs of our guests".

He said the company would start transitioning the outsourced casuals to its new agreement, which at this stage only covers managers, following "a period of consultation". He did not give a date.


Non-managerial staff have previously claimed they were "deliberately excluded" from negotiations for the new agreement and expressed doubt about if and when they would be covered by it.

If the transfer takes place, it will see Kikki.k's labour costs increase significantly as it pays full penalty rates to hundreds of staff for the first time.

The costs come as the company is pursuing ambitious expansion plans, with backing from major investors include private equity firm TDM Asset Management.

Mr Nairn acknowledged the new agreement would be a "significant investment".

However, he told staff that "although you may have seen press coverage questioning our profitability, please be assured these increased salary payments are included in our forward forecasts".

Managers underpaid

The message also detailed how Kikki.k would reimburse 26 managerial staff who it discovered it may have underpaid after incorrectly recording their hours.

The employees are managers whom Kikki.k engaged on an expired 2006 agreement, which allows it to require employees to work a certain amount of hours on weekends, nights and public holidays over the course of a year without attracting penalty rates.


Mr Nairn said an examination of historical rosters revealed some employees' work patterns "have not accurately reflected what was anticipated and these employees have worked less or more weekends/non-standard hours".

He told The Australian Financial Review "we're embarrassed and incredibly sorry" about the underpayments.

"We are committed to fixing this, and making sure it can't happen again."

The company's actions came as the Shop Distributive and Allied Employees Association this week took steps to challenge the new Kikki.k agreement.

An SDA spokesman said the union had written a letter to the Fair Work Commission, requesting "it take steps to satisfy itself, by engaging with staff directly, that all necessary steps were taken to allow this agreement to be genuinely approved".

"The SDA has some serious concerns in regard to this agreement and is currently exploring all available options," national secretary Gerard Dwyer said.

Employer groups have said that fast-food, retail and hospitality employers would most likely use Kikki's "mirroring clause" to flow on penalty rate cuts from the award to enterprise agreements.