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Wesfarmers will be held to account for underpayment: FWO

Fair Work Ombudsman Sandra Parker

Fair Work Ombudsman (FWO) Sandra Parker said Wesfarmers would be held to account, after the $13 billion company revealed on Tuesday that it underpaid 6000 employees in its industrials and safety business for nine years.

“Each week, another large company is publicly admitting that they failed to ensure staff are receiving their lawful entitlements. This simply is not good enough,” Parker said in a statement. 

“Companies and their boards are on notice that we will consider the full range of enforcement options available under the Fair Work Act, including litigation where appropriate,” she said.

Just last week, Wesfarmers’ home improvement business Bunnings Warehouse announced it underpaid some part-time workers for eight years. The retailer currently is conducting a full reconciliation and said it won’t know the scope of the underpayment for another four to six weeks.

The underpayment reportedly was due to an error in Bunnings’ payment system, which affected part-time employees in its warehouses and smaller format stores, who did not receive superannuation payment on the hours they worked over their annual contracted hours from FY12 onwards.

This follows the revelation that Sunglass Hut underpaid some part-time employees for five years. In addition to back paying workers $2.3 million, the retailer agreed to pay a $50,000 ‘contrition’ payment to avoid prosecution by the FWO.

The FWO has signalled that self-disclosure will no longer be enough when it comes to big businesses engaging in wage theft. At a minimum, they will be required to enter into court-enforceable undertakings, which will involve multi-year external audit plans, training programs, contrition payments and a condition to publicly apologise to the community. Businesses that don’t cooperate could face litigation.

The increased penalties are in addition to legislation the federal government is preparing to introduce that would criminalise underpayment, following continual revelations of underpayment in the retail sector and among franchise businesses in particular.

While the new legislation is aimed at deliberate exploitation, it could also lead more organisations to check their payment systems for unintentional errors.

Several retailers that have come forward with issues of underpayment, such as MJ Bale, lay the blame on the complexity of the modern award.

Indeed, 90 per cent of payroll managers said recently that government legislation or employee awards are difficult to interpret, with most agreeing that many of these clauses need to be revised or made simpler.

Payroll managers working in retail were even more likely (96 per cent) to say that government legislation or employee awards are difficult to interpret, according to the survey, which was conducted by the Australian Payroll Association and included 520 payroll managers across a mix of large organisations and SMEs in various industries.

“It is concerning that payroll managers – those who are involved in handling our pay, superannuation and leave entitlements – find the laws governing these things confusing and at times contradictory,” said
Tracy Angwin, CEO of the Australian Payroll Association.

Angwin said one common example many payroll managers find confusing is whether superannuation is payable on leave loading.

“This is so ambiguous that the ATO attempted to clarify their position on it in March this year, and advised that in recognition of it being confusing and not a straight-forward answer, it likely wouldn’t apply ‘Part 7 Penalties’ for non-compliance in the past,” she said.

“Together with my own experience in interpreting employee legislation, I believe it is important to re-examine and review some parts of the legislation to ensure that they can be understood and executed in the real world without ambiguity.”

Wesfarmers on Tuesday said a payroll review identified payment errors in the payment of team members at Blackwoods, Workwear Group, Coregas and Greencap, which prompted a comprehensive review process.

The company is working with PwC to conduct a full reconciliation, but said early estimates indicate it underpaid approximately 2000 current team members and 4000 former team members going back to 2010. The total amount unpaid, including interest, is estimated to be approximately $15 million.

“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,” David Baxby, Wesfarmers Industrials Managing Director David Baxby, said.

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