Woolworths owes workers at least $315 million amid profit drop

The supermarket giant’s unprecedented underpayment scandal is even more severe than first thought – and it has caused a drop in profit.

The wage theft debacle that has engulfed Woolworths is even more serious than first believed, with the grocery juggernaut revealing it short-changed employees a total of $315 million.

That’s $15 million more than the initial estimate of $200 million to $300 million, and it has contributed to a fall in total net profit for the first half of the financial year.

Investigations into the underpayments are continuing, but the total figure could climb higher still

The story broke in October 2019, when it was revealed that Woolworths had underpaid nearly 6000 employees over the past nine years with repayments expecting to cost up to $300 million.

“The calculations of the salary payment shortfall involve a substantial volume of data, a high degree of complexity, interpretation, estimations, and are subject to further analysis of prior periods and the Fair Work Ombudsman’s ongoing investigation,” Woolies told the ASX on Wednesday.

Woolworths has been challenged by the underpayment scandal as well as the drought, bushfires and coronavirus. Picture: Ian Waldie/Bloomberg

The underpayments issue also weighed on the company’s first half profit result, which slipped 7.7 per cent to $887 million despite a 6.0 per cent increase in total revenue to $32.41 billion.

The result for the six months to December 31 was hurt by $51 million in one-off costs related to the Endeavour Drinks separation, and another $80 million for the underpayments review.

Total supermarket revenue increased 6.4 per cent to $21.2 billion. The company will pay a fully franked interim dividend of 46 cents per share, up 1.0 cent on a year ago.

Speaking to shareholders today regarding its half year earnings, chief executive Brad Banducci said the company faced “material challenges” in recent months.

Some of the challenges facing the supermarket giant include not only the underpayment saga but also the ongoing drought, the bushfires and more recently the coronavirus.

But it wasn’t all bad news.

Mr Banducci said BIG W had returned to profit for the first time since 2016 and that he “remained confident” the group would achieve positive results in the second half.

When asked by reporters whether his decision to give up $2.6 million in bonuses and chairman Gordon Cairns’ move to drop his earnings by 20 per cent in November in the wake of the wage theft scandal was “sufficient”, Mr Banducci said the focus at the moment was to ensure it didn’t happen again.

Woolworths CEO Brad Banducci said he expected “consequences” for the executive team. Picture: AAP Image/Bianca De Marchi

But he didn’t rule out further financial “consequences”.

“Moving forward, as far as the consequences for management, myself and our chairman have forgone bonuses and taken a reduction in chairman’s fees and we expect additional consequences for management,” he said.

“We wanted to get through the process and see what the challenges are but we do expect an impact on the group’s executive team collectively.

“We are committed to doing the right thing and we do expect consequences once the dust settles.”

More to come.

– With wires