Company boards have been urged to audit their payroll systems after Woolworths joined a growing line of Australia’s big employers revealing they have massively underpaid workers.
The supermarket giant discovered it had underpaid nearly 6000 staff members as much as $300 million since 2010 after a review of its latest enterprise agreement.
The admission marks the biggest underpayment reported this year since Supercheap Retail Group reported in February that it had underpaid workers $32 million in wages. Michael Hill Jewellers admitted in July to $25 million in underpayments, while, a month earlier, Thales reported underpayments of $7.4 million. Wesfarmers revealed this month it had underpaid its staff by $15 million.
Tracy Angwin, chief executive of the Australian Payroll Association said company boards needed to take a greater interest in ensuring payroll compliance audits were done by qualified staff to address both underpayment and overpayment of staff.
“Executive and non-executive directors at Woolworths should be really worried about their payroll system function right now. Compliance should be directed at board level,” she said.
“We are seeing a trend of boards of directors starting to look at payroll as an area of risk. But it’s probably not happening fast enough and we will see many more of these stories in the coming months.”
More than 50 per cent of payroll compliance problems are overpayment, which Ms Angwin said gave companies another good reason to audit their payroll systems.
She said up to 90 per cent of people working in payroll offices were not properly qualified.
“I’m not aware of anyone in the Woolworths pay office that has a competency-based qualification like a Certificate IV in payroll administration. And that is not uncommon,” she said.
The complexity of the retail award, including penalty rates, would make it difficult for workers to pick up any underpayments themselves, she said.
“The problem is that, if a big employer like Woolworths can’t get it right, the chances that someone who is working at the checkout or as a manager [getting it right] are low because of the complexity of the award. So many things contribute to underpayment that it is almost impossible for a worker to work it out themselves.”
A Woolworths spokeswoman said the company had about 50 staff members in its payroll processing team with an average tenure of 15 years.
“These team members have appropriate training and understanding of payroll processing,” she said.
Shop, Distributive and Allied Employees’ Association national secretary Gerard Dwyer, who represents Woolworths staff, called on all employers and company boards in the retail industry to conduct a thorough audit of their payroll systems “with a focus on salaried staff”.
“Board level interest in payroll compliance audits, and getting qualified staff to do it, would go a long way to fixing these problems,” he said.
Woolworths had identified a cohort of salaried employees who were worse off than they would have been under the retail industry award.
“And that is what they now have to rectify,” Mr Dwyer said. “The problem is occurring in those early-morning or late-night hours and penalty structures associated with those.”
Australian Institute of Company Directors chief executive officer and managing director Angus Armour said companies were committed to the basic obligation of paying their staff appropriately, and boards were “rightly shocked and disappointed if their company fails to meet that obligation. The number of recent high-profile instances of underpayment highlights the need for directors to take appropriate steps to satisfy themselves that their systems are in order and workers compensated appropriately,” he said.
Fair Work Ombudsman Sandra Parker said she was shocked at the Woolworths underpayment and said she would take the underpayment issue up with company boards around the country.
“Because frankly that is the level within organisations that should be taking an active leadership role on this issue, and seeking assurance about compliance from executive managers,” she said.
“We encourage corporates to co-operate with us to rectify breaches, but they must understand that admission is not absolution. Companies should expect that breaking workplace laws will end in a public court enforcement outcome.”
Industrial Relations Minister Christian Porter said large sophisticated organisations including Woolworths and other companies that have admitted underpaying workers “need to have systems in place to prevent this happening again”.
“There are no valid reasons for failing to meet their legal obligations,” he said.
Labor’s industrial relations spokesman Tony Burke called for a wide-ranging parliamentary inquiry into wage theft, looking at its cost to the economy, underpinning reasons and deterrence.
Australian Council of Trade Unions (ACTU) secretary Sally McManus said the federal government’s proposed union-busting legislation would make it harder for unions to help ensure workers were paid properly.
“We need more power for working people and their unions to regularly check the books and ensure that all employers are paying their workers properly,” she said.
Former Fair Work Ombudsman Natalie James, now with Deloitte’s Workplace Integrity practice, said employers need to be aware that annualised salary arrangements were not legal if they were not aligned with an underlying industry award or enterprise agreement and actual hours of work.
“I would urge any business to review this if they haven’t done this recently,” she said.