Soap Company In Hot Water
CCER’s Anthony Micallef explains why Lush’s dirty laundry is a cautionary tale for all employers.
Lush Australia’s recent admission that it had been routinely underpaying its staff shows just how easy it is for organisations – big and small – to get into trouble when their internal infrastructure does not keep pace with changes in the industrial landscape.
Last month the cosmetics company announced it had reported itself to the Fair Work Commission after a lengthy review found it had underpaid more than 5000 employees by $2 million since the inception of modern awards eight years ago.
Peta Granger, Lush’s National Director admitted the underpayments resulted from the company’s manual payroll systems failing to keep pace with the growth of the business.
Speaking at a press conference, Ms Granger confirmed the company had failed to correctly apply overtime rates in the retail and manufacturing awards, saying Lush’s payroll systems “were just not sophisticated enough” to interpret the intricacies of the modern awards correctly.
According to Amy Lyons, Lush’s People Support Manager, it took eight years to properly identify the issue because of a lack of administrative oversight.
“Nobody had the oversight to be able to look at the end to end process and spot a pattern”, Lyons told the media, noting that employees raised payroll concerns with their direct manager only on an individual basis.
The organisation has now developed a national payback scheme to correct the historical underpayments. While speaking to the press last month, Ms Granger said Lush will ensure employees are “paid back every cent that they are owed, plus interest”.
In addition to the $2 million in backpay, Lush will spend a further $1.5 million in external audits and to develop the payback scheme with the National Retail Association (which conducted the review of the business).
The significant financial and commercial costs Lush has found itself with could have been prevented through a commitment to clear and robust internal processes that are monitored and reviewed regularly. It would also have helped to have invested in payroll technologies consistent with the size, maturity and complexity of the organisation’s operating environment.
Greater collaboration between line managers regarding payroll concerns also would have enabled Lush to identify and resolve the issues much earlier.
This case highlights the importance of employers being aware of their industrial obligations and the myriad ways organisations – even those with the best of intentions – can land themselves in trouble.
It also demonstrates the need for organisations to ensure they have the systems in place to adequately support their operations, and to keep pace with modern awards and other industrial obligations.
CCER has developed a range of useful tools and resources to assist you in meeting your obligations, and our dedicated team of Employment Relations Specialists is available to provide advice tailored to your organisation. If you’ve any concerns at all about compliance issues, please don’t hesitate to get in touch. We’ll help you avoid landing in the same hot water as Lush.
Anthony Micallef is an Employment Relations Specialist at CCER.
For further information or advice, do not hesitate to call CCER’s team of Employment Relations Specialists on 02 9390 5255.