A leading employment lawyer says big companies are getting caught out for pushing the boundaries of minimum legal payments, with Target the latest business to admit underpaying staff.
- Wesfarmers has set aside a total of $24 million in its half-year results to repay staff for underpayments
- This includes $9 million to repay current and former Target staff who were underpaid
- Until recently, Wesfarmers also owned Coles, which revealed that it had underpaid workers to the tune of $20 million
Wesfarmers has admitted to further underpayment of staff, including Target workers, after previously underpaying the superannuation of Bunnings employees.
In its half-year earnings report, the conglomerate set aside $9 million to repay Target staff.
This is on top of $15 million that had already been set aside to fix underpayments in its industrial and safety division, which includes tools and safety gear supplier Blackwoods and the Workwear group, including the King Gee and Hard Yakka brands.
The underpayment of the industrial and safety division staff was first revealed in October last year, when Wesfarmers said it owed 2,000 current and 4,000 former staff members underpayments going back almost a decade, around half of which related to superannuation on loadings and allowances.
The underpayments were uncovered as the company audited its pay arrangements, something employment lawyer Andrew Jewell said had become common since the Woolworths underpayment scandal was exposed.
“There’s been so much media coverage about underpayments that large organisations have actually gone and done audits to try and get ahead of the potential issues,” the principal at law firm McDonald Murholme told ABC News.
Union wants payroll checks
The largest union representing retail workers said there was an “epidemic” of underpayment in the sector.
“The fact is that a decade ago there were few instances of systemic underpayment when unions had the right to conduct spot checks of company payrolls,” Gerard Dwyer, the national secretary of the Shop, Distributive and Allied Employees’ Association, said.
“All the recent examples of underpayment have emerged since the Coalition Government changed the law.”
“We will only know that he [Attorney-General Christian Porter] and the Morrison Government are fair dinkum about ending this epidemic if they restore the rights of unions to have ready access to company payrolls to conduct spot checks.”
In response to the Coles worker underpayments revealed yesterday, Mr Porter promised to introduce legislation within weeks to criminalise the worst cases of worker exploitation and underpayment.
“Corporate Australia surely now has got the message that they need to get their house in order,” he said.
“And if they haven’t got that message, they’re going to be absolutely and utterly compelled to in the future by the most vigorous, robust and complete set of laws around wage underpayment that Australia’s ever seen.”
At the time the industrial and safety division underpayments were revealed, Wesfarmers said the amounts equated to less than 1 per cent of the division’s total payroll for the period.
“These were inadvertent errors but they are deeply regrettable and we apologise sincerely and unreservedly to our team members who have been affected over a number of years,” the division’s managing director David Baxby said in a statement last year.
“We are also investing heavily in our payroll system, processes and capabilities to fix this issue and ensure it cannot happen again.”
Administrative excuses ‘a bit of a cop out’
However, Mr Jewell said the excuse of payroll errors did not really fly for large organisations.
“The wage system can be somewhat complex, and I think that’s a valid argument for smaller businesses who say that they just don’t understand,” he argued.
“I think when you get to the level of a Coles or a Woolworths, they’ve got the resources, they’ve got the lawyers, the HR [human resources] professionals to get it right.
“So I think that’s a bit of a cop out for larger businesses who in different business units — pricing and things like that — I’m sure they have much more complex things going on that they get right.”
Mr Jewell said the payment of large numbers of workers below minimum rates likely resulted from deliberate efforts by companies to minimise wage costs and avoid the risk of overpaying staff.
“They go as close to the line as possible, I would say, and so if they get it wrong then there’s an underpayment. Very rarely do they accidentally overpay people,” he observed.
“The easiest way to avoid underpayments, though, is to not play it so close to the line.
“So, if your Coles and your Woolworths really don’t want to get in trouble in areas like this, it’s to have a buffer between what you pay someone and what the minimum is so that if you get your calculations a little bit out you’re safe from underpayment claims.
“They’re not going to do that though.”
Wesfarmers said a review of its payroll system did not identify any further underpayments in its other businesses.
Wesfarmers profits rise
Wesfarmers updated its estimates on worker underpayments in its half-year results, where it also reported a 5.7 per cent rise in net profit to $1.13 billion.
The company unveiled a 75-cent fully-franked interim dividend for shareholders.
Yesterday, Coles supermarkets revealed a $20 million provision for staff underpayments dating back years. Coles split off from Wesfarmers in late 2018.
In a separate announcement coinciding with today’s results release, Wesfarmers said that it had executed trades to sell off a further 4.9 per cent of Coles Group shares.
The sale of the shares at $16.08 is expected to raise $1 billion for Wesfarmers, with a pre-tax profit of $160 million.
Once the sale is completed, Wesfarmers will still hold a 10.1 per cent stake in Coles and retain the right to nominate a director to the supermarket group’s board.