Lush owes employees millions in back pay

Lush Australia has admitted it owes workers millions of dollars in back pay, after discovering a payroll error that meant it had been underpaying staff for eight years.

The retailer has reported itself to the Fair Work Ombudsman over the underpayment, which dates back to the introduction of the modern award system in 2010.

Lush Australia director Peta Granger says early investigations suggest more than 5,000 Australian staff across the retail and manufacturing businesses could be collectively entitled to as much as $2 million in back pay over the eight-year period.

The underpayment was a result of Lush’s failure to upgrade its internal systems.

“We should have had far more respect for our people’s pay and upgraded our payroll infrastructure to keep up with the growth of our business,” she says.

“We would never knowingly underpay. This was not deliberate. It goes against everything we value and believe in, and we are so sorry to have let our staff down in this way.”

Lush employees first raised concerns in August last year, leading to a review of the store’s retail contracts, policies, rostering and salaries. By December, the retailer had 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 a far more significant issue with our payroll system than we originally thought,” explains Granger.

After realising the extent of the problem, the retailer began working with the National Retail Association to conduct an extensive review of the business. It has also been working with a payroll service provider to implement a new, compliant payroll system.

Granger says the company is making a public pledge to fix the mistake and to pay back every cent owed, including interest.

“We discovered this error and it’s our duty to report it—to our staff, to the public and to the appropriate authorities, including the Fair Work Ombudsman.

“Whether it’s $1 or $1000, we are committed to connecting with every employee who’s been affected by our mistake.”

To do this, the retailer has invested $1.5 million in external payroll experts to build a system cataloguing 200,000 handwritten paper timesheets, so the last eight years of payroll can be recalculated accurately.

“This is a complex process, and realistically it will take the rest of this year to get it right.  We are confident, however, that back payments including interest will begin to be paid by December,” Granger says.

Lush was one of a handful of retailers which announced they would not be reducing penalty rates after the Fair Work Commission handed down its decision to cut Sunday rates in February last year.

Granger says the underpayment had not affected any overtime rates paid for late night trade or weekend and public holiday penalty rates.

“The problems are to do with intricate elements of the retail and manufacturing awards, which our very manual payroll system was just not sophisticated enough to interpret correctly,” she says.

“We made mistakes on pay, we found those mistakes and now we are doing everything in our power to pay the money we owe as quickly and as transparently as possible. We know we’re far from perfect, but we always strive to do the right thing.”

By Ruth Cooper