In an ASX announcement, Michael Hill announced a full remediation program after an initial review of its retail employment contracts and rostering practices showed non-compliance with some requirements of the General Retail Industry Award for a number of the company’s store-based workforce in Australia.
The remediation of these issues, which occurred over the last six financial years, is estimated to be a one-off cost in the range of $10 million to $25 million.
“It is not presently anticipated that rectification and remediation will have any material impact on the underlying earnings of the company for FY20 or any future financial years,” it said in a statement.
The historic misapplication of the award was discovered after an initial review by big four firm PwC which was instigated by new Michael Hill chief executive Daniel Bracken.
“When we identified there was an issue, I mobilised a team, supported by independent external experts, to determine the scale of the problem, identify the individuals affected and to ensure full compliance with the award going forward,” Mr Bracken said.
“We will move as quickly as possible to rectify any underpayments with those team members affected. I will be in contact with all team members today to apologise on behalf of the company and to provide an outline of the process we are following to establish who is impacted.”
The company will now commence a more detailed review of all employee records, rostering practices and payments, with this extended review estimated to take several months due to the large volume of data.
Michael Hill is not the first company to report historic underpayments to employees, with cosmetics firm Lush Australia last year admitting to underpaying over 5,000 workers around $2 million after locating a payroll error that saw staff incorrectly paid according to industry awards.
At the time, RSM Australia associate director Jane Wood said the many layers of complexity around payroll tax meant that advisers and their clients needed to constantly review their systems to ensure they were on the right track.
“In [Lush’s] situation, they would have penalty rates, different allowances and some of those awards are very complex and you would need a fairly sophisticated system to manage the different people, and as the population of the workforce grows, you need to have a system that’s fail-safe rather than a manual system,” Ms Wood said.
“Maybe when you’ve got 10 employees, you can sit down and calculate what a person’s remuneration is and if they’ve worked overtime or not, and then, of course, they get penalty rates and additional allowances if they work under certain circumstances.
“You need to have a system that can put that in fairly simply because, otherwise, you couldn’t possibly manually calculate a thousand people.”