We feel it is important that companies admit to mistakes, face the music and commit publicly to putting them right. We feel commercial companies have a responsibility to wider society, not just to staff and customers, and we believe that mistakes should not be brushed under the carpet or obscured using private corporate structures or the excuse of commercial sensitivity. We will continue to be as honest and transparent to the public as possible and to own our mistakes.
We are so sorry to say that, in recent months we have unearthed some serious miscalculations of peoples pay where our payroll system did not automatically pick up all the Award entitlements since the introduction of the Modern Awards in 2010, meaning many of our staff have unfortunately been underpaid.
We estimate these errors have lead to an accidental underpayment of approximately $2 million affecting up to 5000 current and former staff, across the retail and manufacturing businesses, dating back to the introduction of the Modern Awards.
We can assure everyone that the Retail overtime rates paid for late night trade and weekend and Public Holiday penalty rates, which we chose not to cut in 2017, have not been affected by these errors and they have continued to be paid correctly. The problems have to do with intricate elements of the the Retail and Manufacturing awards, which our very manual payroll systems were not sophisticated enough to interpret correctly.
How did it happen?
As our business grew, with a large factory, more shops and bigger support teams, the variety of shifts, patterns of work, different awards and classifications became enormous. During this time, we failed to grow our payroll infrastructure at a corresponding rate. Sadly, it is now clear that these manual systems were not sophisticated enough to interpret the intricacies of the Modern Awards correctly, leading to some staff being underpaid at times.
We would never knowingly under pay our staff – this was not deliberate – and it goes against everything we value and believe in at Lush.
How did you discover the problem?
Last August a concern was brought to us by Support Team members, which led to a series of investigations over the following months. This included an initial review of our retail contracts, policies, rostering and salaries and by December we‘d confirmed three areas of the Retail Award had been breached. We then engaged an external payroll company to process and calculate the money owed, and the calculations were due back in March. Unfortunately this process uncovered further errors and identified it was a far more significant issue with our payroll systems than we originally thought.
At this point we knew we needed expert help, so we began working with the National Retail Association. They conducted an extensive review of our whole business which was completed this month. We’ve also been working with payroll experts, Roubler, to roll out a new compliant payroll system to guard against this happening again.
How are you going to fix it?
Since our first discovery we have been working relentlessly and doing everything in our power to establish the full scale of the mistakes and to put in place a system that allows us to recalculate the back pay we owe each member of staff, past and present, and to pay them every cent we owe plus interest. Our current estimate is that the potential underpayment could be as much as $2 million in the 8 years since the introduction of the Modern Awards. We are investing a further $1.5 million for a system to be customised to manually enter 200,000 historic timesheets onto a software package that will be able to re-run the whole 8 years of payroll and show each member of staff their work history and repayment calculations. We hope that the first of the recalculations will be verified and ready for payment by December.
We have also reported the compliance issues to the Fair Work Ombudsman and the relevant Government departments and we want to work with all of them, and Unions, to sort this situation out as quickly and transparently as possible. We think we’ve got a good plan in place and we are open to contributions from all of them including our staff.
In keeping with the standard used by the Federal Court and in Fair Work rulings, and to ensure that no one is out of pocket for our mistake, this will include interest at 5.5%, and superannuation where applicable.
At the beginning of July we began rolling out a new, compliant payroll system that will interpret the Awards automatically and ensure the correct rates are paid moving forward. Whilst we roll out this system, we will run parallel tests and as an additional safeguard we will be audited weekly by the National Retail Association until we have total confidence that the way we interact with the new system is working smoothly and pay calculations are fully accurate.
Going forward, the Modern Awards within the Roubler system are maintained by industry experts and are audited externally on an annual basis to ensure compliance is maintained. Their system has automatic updates built in, and so if there are any changes under the awards to rates of pay or the way people are paid, unless they go against our previous commitment to Retail weekend penalty rates, they will be incorporated from the minute they come into force.
Who does it affect?
5,000 of our current and former staff will have the last 8 years of their pay history recalculated. Depending on which Award they fall under and their pattern of work, the amounts of back pay each person is owed will vary greatly. Small errors across those eight years could add up to a sizeable sum of money for some staff – for other staff there may only have been the occasional error amounting to a small underpayment, whilst for others there will have been no mistakes at all.
How much does LUSH owe affected staff?
Every staff member’s case will be different, and not everyone will be affected, however we believe we owe as much as $2 million collectively to more than 5,000 former and current staff across our retail and manufacturing operations.
The amounts owed won’t be the same for every person affected, however whether we owe them $1 or $1,000, we are committed to paying back every cent we owe, plus interest and superannuation where applicable, through a nationwide back payment scheme.
How is it being calculated?
We are investing an additional $1.5 million – over and above the $2 million back pay scheme – because we wanted to not just recalculate pay, but to do it in a way that allows staff to look at their work and shift history and see exactly how their back pay calculations are made. This will mean that more than 200,000 historical handwritten timesheets will be scanned, indexed and entered into a payroll system and the last 8 years of payroll will be rerun through compliant software.
How can we be sure you’re paying back the correct amount?
We felt that we could only provide the transparency, accuracy and speed our staff deserve by outsourcing this process to an expert external provider.
The external payroll company has begun to enter 200,000 historic handwritten timesheets onto a new, fully compliant, payroll system to re-run the last 8 years of payroll, so that each member of staff can see, and challenge, the recalculation of their wages and back pay totals.
The National Retail Association will be spot checking the back payment calculation to ensure an additional layer of accuracy and compliance.
We’ve also reported the compliance issues to the Fair Work Ombudsman and the relevant Government departments and we want to work with all of them, and Unions, to sort this situation out as accurately and transparently as possible.
What about former staff?
We’re committed to connecting with every employee who’s been affected by this, past and present, dating back to the introduction of the Modern Awards in 2010, so we can make sure everyone is paid what they’re entitled to. So if you know somebody who worked for LUSH in that time, please ask them to register their details through the contact forms provided. Roubler, our external payroll provider, will also help us track down past employees to ensure we get what is owed to them.
Further to this, the back payments for any staff we are unable to trace will be entrusted to the Australian Taxation Office, so their money is always there should they come forward in the future.
How are you going to make sure this doesn’t happen again?
At the beginning of July we began rolling out a new, compliant payroll system that will interpret the Awards automatically and ensure the correct rates are paid moving forward. Whilst we roll out this system, we will run parallel tests and as an additional safeguard we will be audited weekly by the National Retail Association until we have total confidence that the way we interact with the new system is working smoothly and pay calculations are fully accurate. The new payroll system will also enable all employees to view how much they were paid for each shift worked and its relevant entitlements.
Going forward, the Modern Awards within the new payroll system are maintained by industry experts and are audited externally on an annual basis to ensure compliance is maintained. Their system has automatic updates built in, and so if there are any changes under the awards to rates of pay or the way people are paid, they will be incorporated from the minute they come into force. We are confident this will ensure compliance into the future.
How long will it take to rectify this mistake?
The back pay calculation process has started and the payroll service provider are working as fast as they can, but this is not an overnight task. We are confident that verified calculations will begin to be ready around December and as each calculation is released to us it will be paid out immediately.
If you have any further questions you’d like to ask, please fill out the below contact form and we will be happy to answer them.
Any further questions, please fill out the form below