Woolworths Group ups employee repayments to $315m

Woolworths Group (ASX: WOW) has increased the amount of money owed to more than 5,700 employees from $300 million to $315 million.

The revelation was announced this morning by WOW after the group concluded an in-house investigation that was expanded to include all Group businesses covered by the General Retail and Industry Award (GIRA).

In addition to the $315 million owed in payment shortfalls WOW has added an extra $80 million to be repaid in interest and other costs to employees.

So far WOW, the parent company of Woolworths Supermarkets, BWS and BIG W, has reimbursed salaried store team members $69 million, leaving $326 million yet to be recompensed.

"We are disappointed to have let many salaried store team members down through the discovery of shortfalls versus the GIRA," says WOW.

"We are working hard to finalise the review and repay impacted team members as soon as possible and thank our team for their patience and support through this process."

After the initial $300 million in underpayments was uncovered in October 2019 the company was hit with a class action by Australian law firm Adero Law.

The class action, on behalf of around 7,000 current and former employees of Woolworths Supermarkets, alleges staff suffered systemic wage theft during their employment at the retailer.

It further claims that the underpayments are far greater than WOW is letting on, with Adero Law estimating the company owes employees around $620 million.

WOW's announcement in October was the first in a string of major Australian retailers admitting to underpaying their staff.

In February Coles disclosed that it owes employees $20 million to less than one per cent of its total team members.

For context, Coles currently employs more than 113,000 employees, meaning less than 1,130 staff would be affected by the discrepancies in remuneration identified by the retail chain.

Big box retailer Target also landed in hot water after parent Wesfarmers (ASX: WES) confessed to underpaying staff by $9 million, while jewellery retailer announced in July 2019 that it owes employees between $10 million and $25 million in remediation.

WOW sales up in volatile trading conditions

In conjunction with the updated underpayment figures WOW released its 1H20 results this morning, showing a 6 per cent increase in group sales.

The $32.4 million in sales saw a significant contribution from its online stores, with e-commerce sales up 31.6 per cent in the period.

Ultimately WOW's NPAT dived by 1.7 per cent to $887 million in the half.

For the first time since FY16 BIG W reported a first half profit with an EBIT of $50 million.

The company says BIG W's improvement was driven by sales growth of 2.8 per cent in a "challenging market" as well as improved category mix and cost control.

WOW's challenges with the retail environment and its underpayments scandal will be felt through the second half, but group chairman Gordon Cairns says he and the business will rectify its mistakes.

"At last year's AGM, I said that culture was critical to the success of Woolworths Group and part of a strong culture is to recognise when we have made mistakes and address them as quickly as possible," says Cairns.

"We deeply regret the salaried team member payment shortfalls and want to reassure the team and shareholders that we are addressing them as quickly as possible."

Shares in WOW are down 3.03 per cent to $40.58 per share at 12pm AEDT.

Business News Australia