Coles has insisted all of its managers clock on and off when they work, after discovering they are owed $20 million in overtime as the supermarket giant became the latest of dozens of businesses caught out for underpaying workers.
It is now under investigation after it revealed on Tuesday that it had set aside $15 million in backpay for hundreds of salaried managers at its supermarkets and liquor stores, plus $5 million in interest and costs, as a result of underpaying them over six years.
Coles chief executive Steven Cain apologised to employees who had been “unintentionally affected” and said the company was “working at pace with a team of external experts to finalise our review”.
It is understood the low-level managers, paid between $60,000 and $80,000 a year, had their pay reduced to below the minimum hourly rate as a result of working long unpaid hours or penalty-rate periods.
In a seperate move, consulting firm PwC is also reviewing the pay of award-covered employees, requiring its administrative staff to record their working hours, including start, finish and break times.
Industrial Relations Minister Christian Porter said underpayments had become “endemic” in corporate Australia and new punishments, including “naming and shaming” notices and director disqualification, would make penalties unavoidable.
“With organisations like Coles or Woolworths or Qantas, when this process is complete, penalties will be inescapable, whether they are civil, criminal or of the type that we are now proposing with respect to directorships: banning and publicity,” he said.
Australian Retailers Association executive director Russell Zimmerman said that “complex awards were the cause of most underpayments” and that “despite the vast majority of retailers making every attempt to comply, the opacity of awards made mistakes inevitable”.
He rejected the “apparent premise” of the government’s inquiries into so-called wage theft that retailers were criminals.
“That might sell papers, but when Woolworths, Bunnings, Super Retail Group, or non-retailers like Qantas or the ABC have identified mistakes and fixed them, it’s too simplistic and just wrong to accuse them all of ‘theft’.”
The government’s proposal to criminalise underpayments would “undoubtedly act as yet another major barrier to employment”, Australian Industry Group chief executive Innes Willox said on Tuesday.
“Small business people in particular will be much less likely to take on their first employee, or additional employees, when they will worry that underpayments could lead to lengthy jail terms.”
Coles had informed it of the underpayments “only moments before their financial results announcement” and the regulator would be investigating the business, Fair Work Ombudsman Sandra Parker said.
“Coles Group joins the growing list of major corporates who have failed their employees by withholding their lawful entitlements when they should have measures in place to ensure that they do not,” she said.
“I am calling on boards to seek assurance from their chief executive officers that wages are being paid to employees in accordance with the law. The buck ultimately stops with the chair.”
Coles’ underpayments are a result of the same issue that led Woolworths to underpay its salaried staff up to $300 million over 10 years.
Up to 600 salaried staff, out of a total 11,500, have been affected as well as unknown numbers of former employees. However, Coles said the affected managers made up less than 1 per cent of its 115,000 workforce.
Mr Porter, who is considering powers to disqualify company directors over underpayments, said Coles and other large employers appeared to have taken their eye “off the ball when it comes to the basic obligation to pay their staff”.
Mr Porter signalled he was also likely to give courts the power to require businesses to display a notice that they had underpaid workers.
“My personal view is that if an option is available in the context of consumer law, which that option is, then there is a good reason to suspect that it should be a live and usable option in the context of wage underpayment, particularly when it appears to be the case that this is now an endemic problem in corporate Australia,” he said.
In the days before admitting the underpayments, Coles sent out a memo to salaried staff that “reinforced the requirement for salaried team members to clock in and clock out”.
“In reviewing this information we have identified inconsistencies in clocking patterns and salaried team member ways of working,” the note said, before suggesting it would review rosters to improve “work-life balance”.
When asked by The Australian Financial Review on Friday and Monday whether the note indicated Coles had discovered underpayments, spokesman Blair Speedy said there was no update and the memo was merely part of a regular roster review.
Shop, Distributive and Allied Employees Association national secretary Gerard Dwyer, who worked closely with Coles on its audit, said Coles had a policy of salaried staff clocking on, but it had not been strictly enforced.
“When they started to dig down they did have examples of people who had got out of the habit of clocking on and off because there is a bit of a mindset when going onto salary … people think [wage] people on the agreement have to do that, not me.”
The issue of underpaid salaried staff has beset a range of industries, including top-tier law firms and George Calombaris’ restaurant empire.
New rules coming into effect on March 1 will require employers covered by 20 industry awards to record the hours of salaried staff and conduct annual pay reconciliations to guard against underpayments.
The retail lobby group has attempted to engage Mr Porter about simplifying the retail award but ARA head of public affairs Yale Stephens said “that process to date has proven fruitless”.
Mr Porter has said that his review of industrial relations will include reducing award complexity but has played down major change.
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