July 31, 2018

Payroll systems rarely change, and if there are no complaints then there are no issues, right? That is probably what cosmetics brand Lush thought before their outdated paper-based payroll system was found to be floored and the company now faces a large bill to correct the mistakes and the even more overwhelming task of salvaging their brand and company reputation.

Outdated payroll systems and a failure to keep up to date with general Award conditions may all lead to errors in the payment of wages.  The effects of not managing this correctly has been highlighted in recent media coverage surrounding Lush’s Australian branch which has admitted to underpaying around 5,000 employees an estimated $2 million over an eight-year period. The company’s payroll errors date back to the introduction of the Modern Awards in 2010 and were caused by the company’s payroll systems failure to correctly interpret the new Award requirements.

Modern Award requirements comprise of minimum wages and conditions as well as a number of industry specific allowances payable to workers on top of their hourly or weekly wage. The organisation had not correctly paid its workers the allowances they were entitled to and now faces a $1.5 million investment just to manage the process of assessing what employees were entitled to be paid and processing back payments to correct this mistake.

Issues such as these can be prevented if systems are regularly reviewed and updated. Here are some actions that you can do to prevent a payroll error from happening within your organisation:

  • Understand the relevant Award requirements including how they apply to the work your organisation performs;
  • Stay up to date on changes including minimum wage reviews which take effect from the 1st of July each year;
  • Ensure that your payroll systems accurately collect each worker’s time;
  • Ensure that your payroll systems interpret the Award requirements correctly; and
  • Ensure that your payroll systems are up to date and backed up regularly.

The fact that Lush did not intentionally underpay workers has not prevented this issue from tarnishing the company’s brand internally and externally, as well as having a large financial impact. Lush has been renowned for its corporate responsibility and is widely recognized for being a strong voice in the fight against animal testing in the cosmetics industry. This controversy has undoubtedly affected their brand and had other immeasurable effects on their business.

Masula Compliance can complete a HR Review of your organisation to give you peace of mind that your payroll systems are up to date and compliant. If you would like further information on the Modern Award conditions and allowances, payroll systems or general HR information please contact Masula Compliance directly on 07 3348 3666.