Woolworths has admitted underpaying thousands of its workers as much as $300 million over the past decade, in what is believed to be the biggest such case on record in Australia.

Key points: Woolworths says the underpayment of staff dates back to 2010 and may involve up to $300 million in unpaid wages and entitlements

Woolworths says the underpayment of staff dates back to 2010 and may involve up to $300 million in unpaid wages and entitlements About 5,700 people will receive their full entitlements, including back payments with interest and superannuation contributions

About 5,700 people will receive their full entitlements, including back payments with interest and superannuation contributions Woolworths CEO Brad Banducci has apologised and promised it won't happen again

In a statement, Woolworths said it has discovered about 5,700 salaried staff across its supermarkets and Metro stores had not been paid in full as set out in the General Retail Industry Award (GRIA).

However, the number of underpaid workers could rise depending on the outcome of its internal review — which will also cover its other brands Big W and Endeavour Drinks (which includes Dan Murphy's, BWS, Cellarmasters and Langton's).

The majority of the underpaid workers are department managers across its retail stores.

Woolworths joins a long list of major employers that have recently underpaid their workers including Wesfarmers, Qantas, the Commonwealth Bank, Super Retail Group, Michael Hill Jewellers and the Australian Broadcasting Corporation (ABC).

The retail giant has estimated the one-off impact of the underpayment could be in the range of $200 million to $300 million before tax, given that the issue goes back as far as 2010.

"We unreservedly apologise," Woolworths chief executive Brad Banducci said.

"The highest priority for Woolworths Group right now is to address this issue, and to ensure that it doesn't happen again."

How was the underpayment discovered?

The company said the underpayment emerged when the implementation of a new enterprise agreement highlighted "an inconsistency in pay" under the old agreement for some workers.

As for how the underpayment occurred in the first place, Woolworths explained that its employees were entitled to be paid either their contractual salary or "what they otherwise would have earned for actual hours worked under the GRIA" — whichever was higher.

In addition, Woolworths found that the number of hours worked, and when they were worked, "were not adequately factored into the individual salary settings for some salaried store team members".

The company has reported the issue to the FWO (Fair Work Ombudsman), and has hired accounting firm PwC and law firm Ashurst to assist with an internal review.

Woolworths said an "extensive plan" was in place to remedy the mistake.

It involves reviewing more than 11 million individual records per year across all its businesses across Australia.

How significant is this underpayment?

Woolworths, on average, underpaid its staff up to $33 million annually in the past nine years.

In comparison, the FWO has recovered $40 million for 18,000 underpaid workers in the previous financial year.

The ABC is also being investigated for the alleged underpayment of 2,500 flat-rate casuals over six years.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 2 minutes 37 seconds 2 m 37 s Woolworths joins a long list of major employers that have recently underpaid their workers

In its 2018-19 annual report, the ABC said it put aside almost $23 million for the potential "estimated historical salary and wages and superannuation entitlements owed to certain casual employees".

John Cullinan, secretary of the Retail and Fast Food Workers' Union, said Woolworths had failed at "simple maths".

"The scale of this so-called mistake is huge," he said.

"The value that has been lost from these workers, the opportunity to have had that money to have paid their mortgage, to be able to support their families, is a huge impact."

What's next for underpaid workers?



Woolworths has promised that past and present staff who were underpaid will receive their full entitlements, including back pay with interest and superannuation, as soon as possible.

They will make "interim back payments" before Christmas to affected employees, covering the underpayment it unearthed during the September 2017 — August 2019 period — the two years of records it has audited so far.

Woolworths has created a website where workers can leave their updated contact details.

'Admission is not absolution'

Meanwhile, the FWO has not accepted the company's apology, and indicated it would consider taking Woolworths to court.

Woolworths chief executive Brad Banducci says he will ensure the underpayments do not happen again. ( AAP: Paul Miller )

"The Fair Work Ombudsman will conduct an investigation in relation to Woolworths's self-disclosure and hold them to account for breaching workplace laws," ombudsman Sandra Parker said.

"Lately, we are seeing a disturbing number of large corporates publicly admitting that they have underpaid their staff.

"Some of these matters go back many years and several comprise millions of dollars owed to workers. This is simply not good enough.

"It is particularly concerning that many of these corporates have enterprise agreements in place that they negotiated but then failed to properly uphold the minimum standards.

"These sorts of careless missteps by business can be costly, often running up into the millions of dollars across an entire workforce."

Ms Parker also warned employers that "admission is not absolution" and they could still be prosecuted even if they admitted wrongdoing.