Chairman on why Woolworths underpaid staff by $390 million
The chairman of Woolworths has apologised for a $500 million staff underpayment scandal.
Gordon Cairns said that the “out of control” industrial award system is partly to blame for the underpayment, according to a report by The Australian Financial Review.
Woolworths revealed in October 2019 that it had underpaid at least 5,700 salaried store employees for almost a decade by not accounting in individual salaries for the number of hours worked and the times of hours worked, AFR reported.
Woolworths originally estimated that the underpayments were worth between $20 million and $30 million a year, and that the cost of remediation would be between $200 million and $300 million pre-tax.
The total remediation cost has now ballooned to $500 million, including $390 million in salary payment shortfalls and $110 million in interest and other remediation costs, AFR reported.
“It never should have happened,” Cairns told shareholders at the company’s virtual annual meeting Thursday. “It’s not sufficient to say this is complex. It is complex, but we are a sophisticated retailer and we apologise unreservedly.”
Cairns also said the underpayment scandal was a sign that the award system “might be out of control.”
Woolworths staff were covered by 15 separate awards, and under the general retail industry award, there were 35 clauses and 2,000 rules, according to AFR.
“It puts enormous pressure on our staff,” Cairns said. “It shows actually there might be a better and simpler way.”
Cairns said the company had conducted an in-depth investigation, which he characterised as “not pretty.” He said the investigation found issues in all areas in the group, including hotels and BIG W.
Woolworths has started repaying staff, and has put systems in place to ensure the underpayments don’t happen again, AFR reported. So far, the company has repaid $281 million, and full remediation is expected by the end of the March 2021 quarter.
The Woolworths board now receives a monthly dashboard that shows how many employees have worked for more than 45 hours a week, how many have had two consecutive shifts with less than a 10-hour break, the number of employees clocking on and the number of people whose salaries have been increased to account for the fact that they have worked for more than standard hours, according to AFR.
As a result of the underpayment scandal, Cairns’ board fees were reduced by 20%. Woolworths CEO Brad Banducci and Chief People Officer Caryn Katsikogianis voluntarily forfeited their 2020 short-term bonuses, while other members of senior leadership had their short-term bonuses reduced, AFR reported.
When contacted for a response, a spokesman for Woolworths provided HRD with comments made by Banducci
"At last year’s AGM I spoke about my disappointment after discovering we had inadvertently underpaid some of our salaried team members. It was imperative that we worked as fast as possible to remediate those team members," he said.
"To date we have repaid $281 million and expect to have repaid all impacted team members for six years covered by the GRIA and HIGA awards by early next year. We have also done a lot of work during the year to improve our internal processes to ensure this does not happen again."
