Supermarket giant and one of Australia’s largest employers Woolworths has underpaid nearly 6,000 of its employees close to $300 million dollars due to non-compliance with the industry award over the past decade.
The stunning news overshadowed the release of the company’s first-quarter trading update yesterday.
Comparable sales at the company’s food division grew 6.6% on the same quarter last year, boosted largely by the company’s first foray into the world of collectables. That was much stronger than rival Coles which saw comparable-store sales rise 0.1% (instead of a fall of 0.4% as forecast by analysts).
Sales across all of the company’s divisions totalled $15.9 billion for the quarter, up 7.1% on the same quarter last financial year.
Online sales also made a tasty contribution to the company’s first-quarter result, up 37.4% across divisions to contribute a total of $802 million. Woolies yesterday announced the relaunching of its unlimited online service.
Sales at Woolworths’ Endeavour Drinks liquor division also grew, up 3.2% on a comparable basis. Woolies is looking to separate this and its hotels business with a decision due in the next month or so.
The company’s struggling Big W department store chain saw trading pick up somewhat, with comparable sales up 4.4 percent, with growth in apparel performing strongest
But the most disturbing news from the retailing giant yesterday was the reported failure to pay approximately 5,700 of its salaried workers across its supermarkets and metro stores in compliance with the General Retail Industry Award.
The underpayment was identified after the company reviewed its workers’ salaries prior to implementing the company’s latest enterprise bargaining agreement.
Inconsistencies were identified between the workers’ contractual salary obligations and what they were entitled to be paid under the award.
“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,” the company said.
Underpayments could track back as far as 2010, and the company estimates the total cost of remediation to be between $200 million and $300 million.
The company will make the first back-payments to the affected workers before Christmas.
“The review is being extended to all Woolworths Group businesses in Australia to ensure that all relevant award requirements have been met for salaried team members.
Taking the existing two years of data and using initial modeling 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, is expected to be in the range of $200-300 million (before tax).
“An update will be provided at the Group’s Half Year 2020 results in February,” the company said yesterday.
“As a business, we pride ourselves on putting our team first, and in this case, we have let them down. We unreservedly apologise,” chief executive Brad Banducci said in a statement.
“The highest priority for Woolworths Group right now is to address this issue, and to ensure that it doesn’t happen again.”
Woolies shares fell 1.4% yesterday to $37.20.