After internal investigations unearthed considerable payroll errors dating back to the introduction of the Modern Awards system in 2010, Lush Cosmetics Australia announced a national back-payment scheme, estimated at $2 million.
The company’s manual, outdated payroll system was unable to cope with the intricacies of the Modern Awards, being incapable of adding up the correct award entitlements, leaving current and former staff potentially underpaid.
Peta Granger, director at Lush, noted the team were doing everything within their power to pay back the money as quickly and transparently as possible.
“We are sincerely sorry for letting our staff down so badly,” Granger told the media at the announcement, “[and] we hope they can forgive us for this monumental mistake and continue to feel proud of the company that they have helped us build.”
While it is estimated that staff are owed $400 each, it is far more likely that some of the 5000 affected staff members are owed nothing, while others could be owned up to $10,000.
“That money belongs to our staff,” Amy Lynes, Lush Cosmetics people support manager said in a video interview with Inside Retail.
“It’s incredibly important that we try and locate all our [former] staff so we can pay them what they’re entitled to.”
One of the reasons behind the public announcement of the scheme was to reach former employees, who may have moved on but are still owed money for work done for the cosmetics retailer.
“For us as a business, honesty and transparency is really important,” notes Lynes.
“We want to make sure that we can be very open about this, once we find an issue like this we would never sweep it under the rug, we would always try and be really clear with our staff and the public about what happened and what we’re doing to change it.”
Greg Bamber, a professor at Monash University’s Business School and co-director of the Australian Consortium for Research in Employment and Work, notes that while Lush should have paid more careful attention to their workers and employment arrangements, the company deserves credit for self-reporting the mistake and trying to correct it as soon as possible.
Pointing to “many other cases of underpayment” including 7-Eleven, Pizza Hut that have been reported in the media,” Bamber says “no doubt there are many more that have not been reported.”
A former 7-eleven operator was fined about $193,000 for short changing workers and failing to keep proper pay records earlier this year, while last year it was found that over 20 Pizza Hut franchises had been underpaying delivery drivers; with about three quarters of outlets audited failing to comply with workplace laws.
Bamber notes that while employers regularly used to have their own pay clerks familiar with organisational context who could oversee the company’s payroll and preempt or quickly correct mistakes, many employers have now outsourced payroll arrangements to cut costs, leading to a loss of this contextual knowledge.
Additionally, Bamber urges that young people are particularly at risk of exploitation, with relatively few of them represented by unions that fight for their rights.
To combat this issue, the SDA recently announced a new social media campaign to teach young workers about their rights, with the campaign rolling out over Snapchat, Instagram and Facebook.
“It’s safe to say that a large number of young people barely know unions exist, let alone how they can help, or why they should join one,” SDA national secretary Gerard Dwyer has previously stated.
According to a report by Unions ACT last year, more than three quarters of people surveyed aged 15 to 25 said they had been underpaid, while the Migrant Worker Justice Initiative found 43 per cent of surveyed migrants and temporary Australians were paid $15 an hour or less – below the Australian minimum wage of $18.29 per hour.
Dominique Lamb, CEO of the National Retailers Association, says there was a significant rate of ‘minimal’ non-compliance with payment standards across the retail and fast food industry, and notes the Modern Awards may need to be simplified.
“Whilst we certainly make every effort to educate the industry about what their obligations are, there needs to be some work done to assist them with this and simplifying the process would certainly assist,” says Lamb.
What’s next for Lush?
Lynes notes that Lush’s internal investigations made her realise just how complex the Modern Awards are, and how important it was for businesses to invest in proper infrastructure to deal with these complexities.
“We’ve invested heavily in a new payroll system, and that payroll system was built by an expert payroll provider,” said Lynes, with Lush opting to use payroll solution Roubler moving forward on the advice of the NRA.
“That’s already been rolled out [and] we’re currently testing that system to make sure that the way we interact with it means it pays completely compliantly, and that system is itself is going to be audited externally every year moving forward to ensure it stays compliant.”
Surprisingly, the staff at Lush have been overwhelmingly supportive of the company, with Lynes noting “they’ve been so graceful and big-hearted in acknowledging that we’ve made a mistake, but also working with us as we move forward.”
Staff at all levels of Lush’s structure may have been affected, with the company having many employees who rose to senior management from a shop floor or production room position; having been paid under the Modern Awards during that period.
This journey, however, is just beginning. The audit process expected to take months, and until it is completed an individual staff member cannot be certain if they are entitled to a back payment or not.
“The thing we’re most concerned about now is our staff and making sure that we put things right for them. Moving forward, obviously implementing our new payroll system is a real priority, but after that we as senior management need to concentrate on building the business back up again, and we’re really hoping that, alongside our staff and alongside our customers, we’re able to do that,” said Lynes.
To watch the full video interview with Amy Lynes, people support manager at Lush Cosmetics Australia, visit our website.