Woolworths Group has admitted underpaying around 5700 staff up to $300 million, in a salary blunder that could date back as far as 2010.

A review by Woolworths which commenced earlier this year, following the implementation of a new Enterprise Agreement, found an “inconsistency in pay” between salaried store team members at Woolworths Supermarkets and Metro stores compared to those paid under the new agreement.

While the group has only yet analysed data between September 2017 and August 2019, it found that “the number of hours worked, and when they were worked, were not adequately factored into the individual salary settings” for thousands of workers.

The retail and hospitality group said in a statement on Wednesday that it “unreservedly apologises” for the underpayments and that those affected will receive their full entitlements, including back payments with interest and superannuation contributions, “as soon as possible”, with interim back payments, for the two years reviewed to date, to be made before Christmas.

“As a business we pride ourselves on putting our team first, and in this case we have let them down. We unreservedly apologise. The highest priority for Woolworths Group right now is to address this issue, and to ensure that it doesn’t happen again,” Woolworths Group CEO Brad Banducci said.

Woolworths said it will extend the review to all of its businesses including its liquor and department stores, and will provide an update at the Group’s half year results in February.

Court enforcement on the cards

In response to Woolworths announcement, the Fair Work Ombudsman said in a statement that she is “shocked” that another large, publicly listed company has admitted to breaching Australia’s workplace laws and stated that companies should expect these breaches to “end in a public court enforcement outcome”.

“The Fair Work Ombudsman will conduct an investigation in relation to Woolworths’ self-disclosure and hold them to account for breaching workplace laws,” Fair Work Ombudsman Sandra Parker said.

“Lately, we are seeing a disturbing number of large corporates publicly admitting that they have underpaid their staff. Some of these matters go back many years and several comprise millions of dollars owed to workers. This is simply not good enough.”

Parker said it “particularly concerning” in these cases where enterprise agreements are in place but the employer has failed to properly uphold the minimum standards.

While she encouraged corporates to cooperate with FWO to rectify breaches, she stated that “admission is not absolution”.

“Companies and their Boards are on notice that we will consider the full range of enforcement options available under the Fair Work Act, including court enforceable undertakings and litigation where appropriate,” Parker added.

Earlier this week, the Australian Industry Group released its submission to the federal government’s industrial relations discussion paper into tougher penalties for employee exploitation, saying it “strongly opposes the introduction of criminal penalties for wage underpayments”.

While a string of underpayment scandals have emboldened unions’ push for dodgy bosses to be slapped with criminal charges, the submission warns against calling them “wage theft”.

“While at first glance, the introduction of criminal penalties for underpayments might seem like a good idea, there are many reasons why this is not in anyone’s interests and needs to be rejected,” the group said in its submission.

The employer group says criminal penalties will discourage investment, entrepreneurship and employment growth.

Lack of trained experts an issue, payroll expert claims

Tacy Angwin, CEO and founder of Australian Payroll Association and Director of Payroll HQ told Inside Retailthat many companies are finding themselves in a similar situation to Woolworths due to a “lack of a regular payroll compliance audits”.

“The underpayment goes as far back as 2010, which shows a lack of reviewing payroll systems to ensure that employee pay is being calculated correctly. Often, companies fall into the trap of adopting a set and forget mentality to payroll systems, which can lead to major underpayments such as this one,” Angwin said.

“This is made worse, when organisations have a lack of qualified payroll staff that are unable to pick up these errors prior to them becoming a massive issue.”

She said that government legislation and employee awards are constantly changing so it’s crucial for companies to hire trained payroll professionals and ensure they regularly attend training.

Q1 sales rise

Woolworths’ announcement cast a shadow over the supermarket giant’s first quarter results, which were also released on Wednesday morning.

Comparable supermarket sales lifted by 6.6 per cent on the same period last year, outperforming rival Coles’ marginal sales increase.

Woolworths sales growth was largely driven by the success of its Lion King Ooshies and Discovery Garden collectables campaigns, as Coles Little Shop 2 failed to match the impact of the original campaign.

Woolworths Group CEO Brad Banducci said he is pleased with trading in the year to date and said that preparations for the Christmas period are well progressed.

“We remain focused on providing the best possible customers experience across all of our businesses as we manage a material change agenda in the first half including the implementation of our new Customer Operating Model in Woolworths Supermarkets, the rollout of Fresh Made Easy and the ramp-up of the MSRDC,” he said.

Circular shopping coming to Woolworths

In a busy week for the supermarket giant, on Tuesday, Woolworths announced a partnership with Terracycle on circular shopping platform Loop.

By mid 2021, customers will be able to have products such as washing detergent, shampoo and ice cream delivered to their door in reusable and refillable containers.

After use, the containers can be collected or returned to a Woolworths store to be cleaned, refilled and reused.

This story first appeared on Inside FMCG.