Unless you’ve been hiding under a rock for the last 3 days, you would have seen that Woolworths have got themselves into a bit of trouble after disclosing a mass underpayment of salaried employees.

Woolworths have admitted to underpaying their employees an eye-watering amount of up to $300 million over the last 9 years. This issue was brought to light when Woolies conducted a salary review in the lead up to the implementation of a new EBA.

So, how does this happen you may ask? Well, it seems that the underpayment was caused by not factoring in the number of hours worked, and when those hours were worked (for example late nights, early mornings and weekends) into individual salaries.

Woolworths aren’t the only big-name brand caught out for recently underpaying their staff, we’ve seen similar things from the likes of:

• Rockpool group;
• Michael Hill;
• George Calombaris;
• Coffee Club;
• Subway;
• Bunning;
• Wesfarmers;
• 7-Eleven;
• Supercheap; and
• Qantas.

It seems that underpayment is becoming the next workplace trend – the new ‘workplace yoga’ or ‘flexi work hours’ perhaps? Let’s hope not.

I’ll be the first to put my hand up that I would HATE to be underpaid and whole heartedly believe that all employees should be paid fairly. In saying that, there could be a few reasons behind why we are seeing more and more underpayments in the public eye:

• Lack of knowledge and training compliance of payroll departments – Tracy Angwin, Chief Executive of the Australia Payroll Association, claims that 90% of people working in payroll offices are not properly qualified. This lack of knowledge means that it is unlikely the correct checks and balances and happening regularly enough to pick up these types of errors at an early stage.
• Awards are complex to interpret and navigate – the Modern Awards are ever changing and can be quite complex to interpret, particularly for anyone who does not come from a legal background. As the volume of workers increase for organisations, so does the possibility of more than one Award applying, which therefore multiplies the level of complexity.
• Lack of Governance – it is good business practice to have an overarching system that governs what payroll are doing and cross checking that they’re compliance. This could be someone internally, or an external provider. There seems to be a significant gap in this area for a large number of organisations. This simple lack of process just isn’t meeting the mark!
• Intentional deceit – aka wage theft. I like to believe this is one of the more unlikely reasons for underpayment, but it does happen! This is why the public is outraged because at the end of the day, it’s the worker’s being ripped off to beef up the bottom line.

Regardless of the potential reasons for underpaying employees, the effects of an underpayment are significant. For the employees, not only does it affect their financial position, but also damages their trust in their employer. For the Organisation and Directors, the repercussions are much worse. Large backpay amounts with huge financial ramifications on the business, significant fines for breaches of Awards, reputational damage and negative effects on talent acquisition and staff attrition rates.

To ensure your organisation is compliant and doesn’t end up on the front page of every news outlet for the next underpayment scandal, my recommendations are:

• Conduct an internal audit or BOOT test – as it’s such a hot topic, get on to this audit or BOOT (Better Off Overall Test) ASAP! Conducting an initial report and then following up every year is essential to ensure your organisation keeps up to date with the ever-changing workplace laws. This is essential for any employees on a salary, to ensure that they are receiving the same or more than what they would be entitled to under the relevant workplace instrument.
• Self-disclosure – if you become aware of any issues throughout your audit, SELF-DISCLOSE! This may not necessarily reduce the financial impact, but it will put you ahead of the PR game.
• Acknowledgement and backpay – although an apology won’t immediately fix the problem, acknowledging the error to your team and detailing your plan to fix it immediately is the best cause of action. Your people are your competitive advantage, so treat them right.
• Be transparent about pay – I can’t stress this enough! Clearly outline to salaried employees what they are being paid for. When they ask questions around their pay, walk them through the answer and help them understand it. Transparency is key.

There really are no excuses for underpayments but putting in place some robust processes around payroll will help to ensure you don’t end up on the front page of the news too. If you do need assistance checking whether your employees are being paid correctly, HR Gurus can help.