Australia’s underpayment scandals: Where is it all going wrong?

The issue of paying staff properly – or the failure to do so – has become front and centre for corporate Australia, which has been reeling from revelations of underpayment that seem to emerge every other week.

According to data from payroll provider Ascender, more than 1 in 4 Aussies are being paid incorrectly (28 per cent), and two in 10 Aussies are being underpaid (22 per cent).

Speaking in Sydney recently, head of the Association of Payroll Specialists Jason Low said that the underpayments were stemming from disastrous undervaluing of the payroll department.

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“I think the big issue here is around resourcing,” he said.

“Unfortunately, payroll is not a profit centre, it's a cost centre – all we do is spend money and organisations have looked at ways on how to minimise that.”

With under-resourced payroll departments preoccupied with the day-to-day duties of getting pay out correctly, there is little space for navel-gazing, he added. “There's not enough time for somebody to sit down and say, am I doing the right thing? We just need to get to that next pay run.”

Companies were well-meaning, but had “fallen asleep on the wheel” when it came to payroll, he said, adding that there was an assumption that “the software will do it for us anyhow”.

Echoing Low’s comments, law firm Herbert Smith Freehills principal Michael Gonski indicated that companies only leapt to action about underpayment when it was already too late.

“From a lawyers perspective, we are coming in only on the clean-up part, not at the beginning,” he said.

“And if you look at the cost of the cleanup versus what the cost would have been of investing at the beginning, it's very clear that if you actually thought of payroll or legal etc. not as a cost center, you wouldn't have these problems.”

By now, company executives have now woken up to the gravity of the matter. “Are people taking it seriously in the boardroom. A hundred per cent yes,” said Gonski.

Businesses are also beginning to take a more preventative approach with proactively asking for spot audits, rather than just waiting for a general audit, he added.

According to research from Ascender, 80 per cent of businesses intend to do a review of their payroll processes in the next 12 months.

Underpayment scandals becoming the norm

Australians are becoming more familiar with stories of underpayment, sometimes from some of the biggest employers in the country.

In late October this year, Woolworths admitted it had underpaid nearly 6,000 staff up to $300 million across the span of a decade, news that sparked major retailers David Jones and IGA to also review their payroll processes.

The ABC, Qantas, the Commonwealth Bank of Australia, Bunnings, Shangri-La Sydney and global jewellery chain Michael Hill have also been caught ripping off workers by millions of dollars.

Super Retail Group, the umbrella group which owns Rebel Sport and Supercheap Auto, didn’t pay managers overtime by $32 million.

Possibly the most publicised wage theft scandal this year centred around former Masterchef judge George Calombaris, whose hospitality group MAdE Establishment had to pay back nearly $8 million in wages and superannuation, as well as a $200,000 ‘contrition payment’.

Shortly afterwards, he and fellow Masterchef judges Matt Preston and Gary Mehigan were dropped from the popular cooking show.

Calombaris was not the only celebrity chef scrutinised for underpayment: months after Calombaris, Rockpool bar and grill chief Neil Perry had to backpay his own staff $1.6 million.

Dozens of franchises and chains have also been exposed, such as Subway, 7-Eleven, Coffee Club, Sunglass Hut, Endota Spa Sydney, Merivale, and more.