Cosmetics retailer Lush Cosmetics Australia has announced an estimated $2 million national back-payment scheme after serious payroll errors were found dating back to the introduction of the Modern Awards in 2010.

Lush’s manual, outdated payroll system was unable to cope with the company’s growth, as well as being unable to properly interpret the intricacies of the Modern Awards, leading to some staff being underpaid.

External audits are expected to take months to complete, and some 5000 current and former staff may be affected.

While it is estimated that staff are owed $400 each, it is far more likely that some will not be owed anything while others could be owed up to $10,000.

“We are sincerely sorry for letting our staff down so badly,” said Peta Granger, Director at Lush, “I am so sorry. We’re doing everything within our power to pay back the money that we owe to staff as quickly and as transparently as possible.”

“We hope that they can forgive us for this monumental mistake, and continue to feel proud of the company that they have helped us build. It’s been a painful mistake to learn [from], but it will absolutely drive our decision making and influence us into the future.”

Granger noted the company had set aside an amount money for the back-payments already, but until the 200,000 time sheets over the period have been scanned and logged, the amount is just an estimation.

In the cases where incorrect superannuation has been paid, Lush has committed to pay the correct amount back to the staff members super fund, with interest.

Becoming compliant moving forward

The company has already begun moving to a Modern Award compliant payroll system, Roubler, on the advice of the National Retailers Association, which will be auditing Lush’s payroll weekly until they have confidence this issue has been resolved.

People Support Manager at Lush Amy Lynes noted that while the company took part in the transitional scheme to bring in the Modern Awards, the payroll system used at the time wasn’t up to code.

“The error that we made was in not investing in the technology that would have allowed us to build an infrastructure to interpret the Award at the time we made the move into the Modern Award,” said Lynes.

While there had been complaints by staff about payment issues, they were largely focused on human error, and made it difficult to spot an overarching issue.

“Staff would raise their individual payroll concerns with their direct manager, so nobody have the oversight to be able to look at the end to end process and spot a pattern,” said Lynes.

“In late August … a few concerns came to light that made us to be able to look at the whole end to end payroll process, and allowed us to spot a pattern emerging.”

Other retailers are at risk

Dominique Lamb, CEO of the National Retailers Association, noted that Lush had made an honest, transparent announcement, and was incredibly detailed about the mistake they had made.

“This is a great example of making a mistake, owning that mistake, and then taking every effect to fix that mistake,” said Lamb.

“The industrial relation system in Australia is incredibly complicated, and small-medium size and large size businesses actively deal with it every day. This is a great example of why employers out there should be checking their systems regularly, making sure they are compliant, and that they are paying their staff properly so that something like this doesn’t happen to them.”

Lamb estimated that 40 per cent of companies in the retail, fast food and hospitality industries had some level of non-compliance; whether that be on the scale of Lush’s announcement today, or an individual employee getting paid incorrectly for a short period of time.

Given the scale of Lush’s growth, it’s entirely possible that similarly scaled businesses could have the same issue; they just might not know it.

“It’s absolutely likely if a business has grown quite rapidly over a period of time and has not maintained and continued to review those systems and look at how they’re paying and how they’re processing pay, this could absolutely happen to them,” said Lamb.

“If you aren’t checking your payroll systems, this is definitely the time to make sure you’re definitely getting it right.”

Lush staff were addressed earlier today, either in person or via a pre-recorded video, Granger stating it was “mortifying” to realise what they had done to their staff over this period.

“We have a sincere belief in ethical trade, and in fair workplaces, and we’ve campaigned on a lot of these issues over the years,” said Granger.

“I guess the realisation is that while we’re an ethical company, and we are sincere and well meaning, we’re also human. We’re capable of making mistakes, even big ones like this.”

Updated: 2.25pm

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