Jewellery chain Michael Hill says it underpaid staff by as much as $25 million over the past six years, making it the latest major company to confess to short-changing workers.
The revelation has raised new questions about whether the penalties for underpayment are a big enough deterrent to breaking the law.
Michael Hill, which employs about 2000 people in its 171 Australian stores, on Thursday said an initial review of store staff contracts and rosters instigated by its new chief executive Daniel Bracken found “non-compliance” with the applicable award rates.
A more detailed review is being undertaken “with urgency” to determine exactly how much each worker is owed, it said.
An early estimate for the total backpay bill is between $10 million and $25 million.
“We have self-discovered this issue, we’re going to resolve this matter as a priority, we’re going to pay affected team members what is owed to them,” said Mr Bracken, who joined the business in November last year.
“This is something we’re particularly disappointed by.”
Michael Hill did not notify the Fair Work Ombudsman (FWO), which said it was “concerned by the scale of the reported underpayments” and would contact the $200 million company itself.
The FWO can pursue fines for breaching workplace law, with the maximum penalty for a company $630,000 per contravention. The highest penalty the FWO has ever secured through litigation is $660,000.
Allan Fels, the former competition tsar, said the Michael Hill case showed potential penalties for underpayment were not enough of a deterrent.
“It’s alarming, the disparity between the amount of underpayment and the profit gain for the business, and the actual fine,” he said.
Mr Fels said workplace law penalties should be brought into line with consumer law, under which companies can be fined up to $10 million, or three times the financial benefit they received, per breach.
Those changes, and potential jail time, were recommended in Mr Fels’ Migrant Workers’ Taskforce review. The Morrison government has accepted the review’s 22 recommendations in principle but is yet to enact them.
Michael Hill is not the first large company to be caught out on wages. Super Retail Group, which owns Rebel Sport and Super Cheap Auto, in February confessed to underpaying store managers about $32 million over six years by not applying overtime rates properly.
And in the same month Qantas said it had underpaid 55 head office workers by around $8000 a year each because it had not applied the relevant enterprise agreement.
Australian Council of Trade Unions secretary Sally McManus said employers were breaking the law everyday and the government needed to do more to stamp out wage theft.
“As we can see from examples like Michael Hill, these are not small employers who do not know or have internal capacity to understand the law,” she said. “Often this law-breaking is deliberate and planned.”
The backpay bill could significantly dent Michael Hill’s profit, which market analysts expected to be about $28 million next year.
Michael Hill’s shares fell 12 per cent on the news, closing at 52¢.
Softening the bad news, Michael Hill also said on Thursday that it had arrested falling sales at its store network in the most recent quarter, delivering same-store sales growth of 0.1 per cent.
Sales had been tracking at negative 4.8 per cent for the first three quarters of the year.