George Calombaris’ business empire underpaid staff millions

UPDATE: PREMIER Daniel Andrews says it is important that George Calombaris’s company has recognised it underpaid staff by $2.6 million due to six years of chaotic bookkeeping and is repaying them.

The pay problems affect 162 of Mr Calombaris’ 430 full time staff.

PREMIER Daniel Andrews says it is important that George Calombaris’s company has recognised an error was made in underpaying staff by $2.6 million due to six years of chaotic bookkeeping.

As the Herald Sun online exclusively revealed yesterday the TV chef, who is in Japan shooting MasterChef, told staff in an email on Monday he was “devastated”.

“You, our amazing team, are the key to our success and I am so sorry we have messed up and let you down on a fundamental, which is to ensure our people are paid what they are ­entitled to,” he said.

“We have been working extremely hard to fix this.

Mr Andrews said it was important the company was fixing the error.

What you didn’t know about George Calombaris

Calombaris shows off his new-look restaurant

George Calombaris has told staff in an email he is “devastated”. Picture: David Geraghty

“I know George Calombaris. He is somebody who grew up proudly in my local community,” he said.

“He’s a Mulgrave person and he’s family have been there for a very long time,” Mr Andrew said.

“I bump into George on a fairly regular basis. I think the most important thing is that an error has been made, they have recognised it and they are making good.

“As far as the media reports go, I think there’s going to be payments as early as this afternoon.”

The email to all workers — seen by the Herald Sun — says short-changed staff will be paid everything owed to them: “Money will appear in bank ­accounts from this afternoon.”

The payout figure is set to grow, with the business still contacting ­former employees. Another $1 million may be forked out to correct ­errors in their salaries and overtime.

The pay problems affect 162 of the 430 current fulltime staff, including chefs and waiters at top Melbourne restaurants including The Press Club, Gazi and Hellenic Republic. But staff at Jimmy Grants are not affected.

Calombaris called in professional services powerhouse KPMG earlier this year and its experts confirmed the underpayments fiasco.

In a frantic 24 hours this week, it is understood the celebrity chef’s business group Made Establishment self-reported the issue to the Fair Work Ombudsman.

“We will work collaboratively with the Fair Work ­Ombudsman through this ­process,” Calombaris said.

The fiasco is expected to set off a chain reaction of self-­reporting throughout the restaurant industry, notorious for erratic bookkeeping.

Systems were so poor, the KPMG review found, that ­almost half the staff were ­overpaid while other staff were being paid a higher base salary than they should have received.

Calombaris told staff in the email: “We have no intention of seeking to reclaim any salary overpayments and all those who had been incorrectly classified higher than they should have been ... will retain the same pay they are on now.”

It is understood the repayments will not hurt the group’s bottom line.

Inside The Press Club restaurant. Picture: Andrew Tauber

The probe began when suspicions were raised by new chief executive Troy McDonagh late last year. It is believed no one had filled the crucial position before his arrival.

Made Establishment is blaming “historically poor processes used in classifying our employees” which led to “unintentional underpayment, where the salaries and overtime paid to several of our team members were below what they should have been”.

“We have grown so much over the past six years and our internal systems clearly let us down in dealing with the increased complexity and size of the business,” Calombaris added in the email.

George Calombaris. Picture: Richard Hatherly

The business had received a “heads-up” from the Fair Work Ombudsman 18 months ago, which he admitted “should have resulted in us fixing our systems sooner”.

“Regrettably, our attention to detail at that time wasn’t at a level it should have been.”

Calombaris said hiring Mr McDonagh and a new human resources manager, and improved processes, meant the business was now on track.

“I am disappointed to not be able to be there in person today, but I want you to know that we take full responsibility for the mistakes we have made, and we have taken every step to ensure this is resolved as soon as possible,” he said.

STRIFE ON THE PLATE — How bad books were uncovered

GEORGE Calombaris is best known to Australians as the pint-sized, energetic, ever-smiling MasterChef host who helped turn us into a nation of foodies.

But the realities of his ­meteoric rise have been laid bare with poor back-of-house processes said to have been plaguing his business over six years, leading to revelations staff were underpaid.

These only came to the fore when Calombaris realised last year that he needed to bring someone on board who could overhaul the business.

Which is where the $250 million investment fund overseen by Swisse vitamins chief executive Radek Sali comes into play.

Radek Sali and George Calombaris. Picture: Rob Leeson

Mr Sali bought a one-third stake in the Jimmy Grants chain last year and spoke of an “aggressive expansion” from five to 40 restaurants — even speaking of going ­international.

But before any of that happened, Mr Sali — known for his sharp mind as Swisse CEO — wanted to “fine tune” operations. It was under this guidance that industry figure Troy McDonagh came on as chief executive of Made Establishment at the end of last year.

It was McDonagh and his new human resources officer, after conducting an initial analysis of the way staff were taken on the books and how payroll worked, who raised the alarm.

Calombaris was worried and brought in high-powered professional services heavyweight KPMG, who confirmed the worst fears.

Amid a stream of over and underpayment to staff, about $2.6 million was owed to 162 of 430 staff.

But Calombaris, 38, despite his relative youth, has bounced back before.

Success came unusually early to the confident son of a Greek Cypriot mum and an Italian-Greek dad.

At only 24, he was recognised for his “mad brilliance” at Federation Square’s Reserve Restaurant. But he learned critical praise didn’t fill the seats and the lack of income saw him transform himself.

MLA Australia Day TVC shoot with George Calombaris at the Australian Technology Park, Eveleigh on December 18, 2015. Photo by Anna Kucera

He brought in business partners in the shape of investors, including property investor George Sykiotis, and formed the Made Establishment Group.

The model was unique in that they would buy properties rather than rent them.

According to reports, revenue leapt from $7 million to near $30 million in half a decade as the empire grew.

But like all hospitality businesses, there were rumblings of problems, such as when Made Establishment sold off properties in 2014, including the East Brunswick home of Hellenic Republic.

Calombaris said at the time: “We’ve made a few mistakes but we’ve have some real successes too.”

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