SYDNEY (Reuters) - Woolworths Group Ltd (WOW.AX) said it had underpaid thousands of supermarket workers for years and will need to repay as much as A$300 million ($200 million), the latest and most high-profile company to be caught up in wage scandals across corporate Australia.
The admission from the country’s biggest company by revenue prompted a government agency to say it would investigate Woolworths, as well as a call from an opposition politician for a parliamentary inquiry into what he called “wage theft” in Australia.
The underpayment of workers has emerged as a hot-button issue this year but Woolworths’ disclosure is the biggest by far, increasing the odds that the government will be prompted into more action.
Woolworths said a routine internal review found the salaries it had paid to about 5,700 permanent employees failed to take into account an allowance for overtime which they should have received under industrial laws.
“We’re unequivocally sorry and we’re going to repay the money, no questions asked,” said Woolworths CEO Brad Banducci on an earnings call, overshadowing a robust rise in first-quarter sales.
Woolworths added that the underpayments may date back to 2010, and said it would contact staff who had left. It plans to start making the repayments by the end of the year.
The grocery giant estimates it will have to repay between A$200 million and A$300 million. At the top end of the range, the amount is equivalent to around A$52,600 per person.
Government agency the Fair Work Ombudsman said it was “shocked that yet another large, publicly listed company has ... admitted to breaching Australia’s workplace laws on a massive scale”.
It will investigate Woolworths, which reported the breach itself and “hold them to account”, it added.
Shadow industrial relations minister Tony Burke of the centre-left Labor party said in a statement he wanted a parliamentary inquiry into “the reasons for wage and superannuation theft, the cost of wage theft to the economy, the best means of uncovering and deterring such theft, and the taxation treatment of those affected.”
“While Woolworths has today come forward and committed to paying its workers what they’re owed, it should not have taken this long to uncover these underpayments,” the statement said.
Other companies embroiled in wage scandals this year include Super Retail Group Ltd (SUL.AX), a seller of auto, sports and outdoor goods. It said in February it had underpaid managers by A$43 million, an acknowledgement that forced the departure of its CEO.
Since then, one of Australia’s best-known celebrity chefs, George Calombaris, admitted to underpaying restaurant staff nearly A$8 million while jeweler Michael Hill International Ltd (MHJ.AX) has said it underpaid staff A$25 million.
Retail conglomerate Wesfarmers (WES.AX) said this month that about 6,000 staff at its industrial and safety business were underpaid by about $15 million since 2010, while its Bunnings unit last month said there was a payroll issue relating to pension payments.
Business groups have argued that because the wage system is complex, they shouldn’t be penalised for errors. Some of the companies caught up in underpayment problems have also blamed software or technical errors.
The Australian Industry Group, a group representing more than 60,000 companies, said in a discussion paper this week there was an important distinction between “employers that have made genuine mistakes which have led to miscalculations and underpayments, and employers that deliberately underpay their employees.”
Many instances of incorrect payments were the result of misunderstanding or error and employers should not be at risk of being labelled a “thief” for such mistakes, it added.
Woolworths’ wage disclosure clouded a bigger-than-expected jump in supermarket sales, which were up 6.6% on a same-store basis for the three months to end-September as it benefited from a wildly popular “Lion King” collectable toy promotion.
By comparison, smaller rival Coles Group Ltd (COL.AX) on Tuesday reported much slower same-store supermarket sales growth of 0.1%.
Shares in Woolworths closed down 1.4%, underperforming an 0.8% decline for the broader market.
($1 = 1.4562 Australian dollars)
Reporting by Byron Kaye; Additional reporting by John Mair and Paulina Duran in Sydney, Ambar Warrick and Niyati Shetty in Bengaluru and Miyoung Kim in Singapore; Editing by Edwina Gibbs