Woolworths apologises for underpaying 5700 staff

Supermarket giant Woolworths has apologised for underpaying 5700 staff by as much as $300m over nine years.

Woolworths is the latest retailer to admit to underpaying its workers, with the nation’s largest supermarket chain apologising for not paying as many as 5700 workers the industry award over the last nine years.

Repaying the supermarket workers will cost Woolworths as much as much as $300 million, making it the biggest wages underpayment to date by an Australian public company.

It came as Woolworths reported first-quarter sales growth of 7.1 per cent from continuing operations, driven by its grocery operation as a result of improved online sales and several promotions.

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Woolworths said the underpayment was uncovered in a review triggered this year by the implementation of a new enterprise agreement.

It said the underpayments applied to workers at Big W, Dan Murphy’s and BWS, as well as at its supermarket businesses. Initial analysis of two years of wage records show 5700 out of 11,000 supermarket employees have been underpaid.

“As a business we pride ourselves on putting our team first, and in this case we have let them down,” Woolworths Group CEO Brad Banducci said.

“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.”

The admission comes after retailers such as Bunnings, Michael Hill and 7 Eleven also said they had discovered that workers had been underpaid, some for as long as a decade.

Woolworths said that taking the existing two years of data and using initial modelling across the group, the estimated one-off impact for remediation, assuming the issue could go as far back as the implementation of the modern award in 2010, was expected to be in the range of $200m-$300 million, before tax.

An update will be provided at the half year results in February, it said.

“Woolworths Group unreservedly apologises after a review found that approximately 5700 salaried store team members working in Woolworths Supermarkets and Metro stores have not been paid in full compliance with Woolworths Group’s obligations under the General Retail Industry Award (GRIA),” the retailer said in a statement.

“The review highlighted an inconsistency in pay for a number of salaried store team members compared to team members paid under the new EA,” it said.

“Annual salaries for store team members are set to cover ordinary working hours and reasonable overtime.

“However, team members are entitled to be paid the higher of their contractual salary entitlements, or what they otherwise would have earned for actual hours worked under the GRIA.

“The review has found the number of hours worked, and when they were worked, were not adequately factored into the individual salary settings for some salaried store team members.”

Analysis is yet to be done of the pay of 8000 workers at Big W, Dan Murphy’s and BWS but their anticipated underpayment is included in the $200 million to $300 million estimate.

The underpaid supermarket employees were paid an average annualised salary of $73,000 but the yearly pay was not enough to cover the overtime, penalty rates and allowances they were legally entitled to receive under the retail award.

Woolworths said it was committed to fully rectifying payments shortfalls and an extensive plan was in place to ensure salaried team members’ pay was correct and compliant.

It said first interim back payments would be made before Christmas. Affected current and former salaried team members would receive their full entitlements, including back payments with interest and superannuation contributions, as soon as possible.

Last month Bunnings said it had discovered an error in superannuation payments for some part-time workers that went back almost 10 years.

The Wesfarmers-owned hardware chain advised that it had been alerted to an error in the payroll system code, dating back to 2011. The error affected part-time employees in Australian warehouses and smaller format stores who had worked more than their annual contracted hours from the 2011-12 financial year onwards.

First quarter sales

News about the underpayments came as Woolworths reported first quarter sales rose to $15.90 billion for the 14 weeks to October 6, up from $14.85 billion a year earlier.

Mr Banducci said there was strong momentum across the company’s portfolio.

Woolworths said its Australian food sales were up 7.8 per cent for the quarter to $10.66 billion, or 6.6 per cent higher on a comparable basis, while New Zealand food sales increased 8.0 per cent in Australian-dollar terms to $1.66 billion.

The Endeavour Drinks arm saw sales rise 4.9 per cent year-over-year, the Big W chain’s sales were up 2.6 per cent and the hotels division recorded a sales increase of 5.5 per cent the company said.

With Dow Jones