Westpac entangled in new Fair Work Ombudsman investigation over staff pay

The banking major, led by Peter King, faces a new Fair Work Ombudsman probe of its pay practices, after previously admitting to botching staff entitlements.

Westpac’s staff underpayments issue is the latest in a string of compliance failures at the bank. Picture: Picture: NCA NewsWire/James Gourley

Westpac confronts a new Fair Work Ombudsman probe of its pay practices, after the bank admitted to botching staff entitlements in 2020 and joined a spate of large companies plagued by the underpayment issue.

Sources close to the probe said Westpac may end up having to repay tens of millions of dollars to employees, after already forking out about $6m to backpay 6,400 former and current staff.

Westpac’s underpayment woes add to those disclosed by rivals Commonwealth Bank and National Australia Bank, while other companies that have grappled with the issue in the past three years include Woolworths, Bunnings, Qantas, Michael Hill and 7-Eleven.

On the latest Westpac matter, a Fair Work Ombudsman spokesman said: “The Fair Work Ombudsman is conducting an investigation relating to Westpac after the company disclosed that it is reviewing pay-and-entitlements issues that are separate to those covered by the company’s 2021 Enforceable Undertaking with the Fair Work Ombudsman.”

“We expect any employers that identify noncompliance to fully co-operate with our investigations to ensure that employees are quickly repaid any outstanding entitlements. Any workers with concerns about their pay should contact us,” he said.

The Fair Work Ombudsman hit Westpac with an Enforceable Undertaking in November, after the bank admitted the initial underpayments issue in 2020. The new investigation is said to centre on errors including around time sheets, incorrect loading and meal allowances.

A Westpac spokesman said the bank reported the earlier issue to the Fair Work Ombudsman in 2020 regarding the underpayment of long-service leave entitlements to some employees.

“Westpac has since repaid all long-service leave underpayments to the current and former employees that it could locate, with interest. We apologise to anyone who was impacted by this error,” he told The Australian.

“Since then, Westpac has been undertaking a broader review of its payroll system and where we find an issue, we fix it and repay all current and former employees their correct entitlements, with interest.”

The bank spokesman declined to comment on any financial exposure Westpac expects due to the latest review.

The prior underpayments occurred across Westpac’s portfolio of financial services brands, including St George and Westpac. Those underpayments happened between 2014 and early last year, with individual underpayments ranging from less than $1 to more than $75,000.

The issues included payroll system errors and Westpac placing some employees on the wrong long service leave plan.

The underpayments saga at Westpac adds to a barrage of compliance issues faced by the bank, including having to pay a record $1.3bn penalty to Austrac in 2020 for millions of breaches for anti-money laundering laws. That highlighted shortcomings in some of Westpac’s antiquated systems.

CBA’s staff underpayments tally sits at $63m, including issues within its retail stockbroking arm CommSec.

In October, the Fair Work Ombudsman started Federal Court proceedings against CBA and CommSec for alleged contraventions of the Fair Work Act for failing to pay 7,425 workers $16.44m.

NAB has set aside $128m to rectify the underpayment of staff, and has repaid $109m of that amount. Unlike its peers, ANZ has not been entangled in a staff payment scandal.

Modelling undertaken by advisory and accounting giant PwC in 2020 using Fair Work Ombudsman data estimated there were about $1.35bn in staff underpayments every year. It highlighted the sectors at most at risk as construction, healthcare and social assistance, accommodation and food services and retail respectively.

PwC’s report identified that “complexity is still the hallmark” of the award and industrial relations system.

“Some common industry awards contain over 10 separate rules that affect overtime accrual. Penalty rates, annualised salary provisions, notification requirements for change of roster rules all vary across awards, industries and sectors, creating a broad runway for errors to be made by employers,” it said.

The report also said in many cases a small systems error became a “multimillion dollar liability” by the time it was found, often many years later.

Woolworths has endured a tough time in recent years on the issue of staff underpayments.

The supermarket giant in December had a Federal Court hearing – to approve a settlement between it and law firm Adero – adjourned until early this year. Justice Bernard Murphy said aspects of the deal needed improving, and he was concerned about how the settlement would sit given concurrent civil action by the Fair Work Ombudsman.

The supermarket giant’s underpayment bill repaid to staff amounts to $370m, while it is also making an additional $50m voluntary payment to employees covering potential issues in the years 2010-2013.

The controversy over the underpayments issue led to Woolworths chief executive Brad Banducci giving up his short-term bonus in the 2020 financial year.

At the time, Mr Banducci and Woolworths chairman Gordon Cairns “acknowledged their leadership responsibility” for the issues that saw thousands of Woolworths staff underpaid.