Coles says it has underpaid staff in its supermarket and liquor stores and has set aside $20 million to pay back employees.

Key points: Coles says about 5 per cent of its liquor and supermarket managers have not been paid to industry standard

Coles says about 5 per cent of its liquor and supermarket managers have not been paid to industry standard This makes up about 1 per cent of all staff, with the review going back six years

This makes up about 1 per cent of all staff, with the review going back six years The announcement came as the supermarket giant posted flat half-year earnings

The company said it was reviewing arrangements for staff who were paid a salary under the General Retail Industry Award (GRIA) and had so far found about 5 per cent of supermarket and liquor store managers were not paid correctly.

The total underpayments plus interest came to $16 million from its supermarket arm and $4 million from the liquor division and affected 1 per cent of total staff.

Chief executive Steven Cain apologised to affected staff and said they would be contacted once the review was finalised.

"We aim to make Coles a great place to work, and apologise to those team members who have been unintentionally affected," he said.

"We are working at pace with a team of external experts to finalise our review. Once completed, we will contact all affected team members, both current and former, to remediate any identified differences in full."

Woolworths, the ABC, and Flight Centre have all been caught up in underpayment scandals recently and the Fair Work Ombudsman said it was "disappointed" to see Coles join this "growing list".

"Yet another large, listed Australian company has underpaid employees millions of dollars, and in this case they chose to inform us only moments before their financial results announcement," Sandra Parker said in a statement.

"Coles Group joins the growing list of major corporates who have failed their employees by withholding their lawful entitlements when they should have measures in place to ensure that they do not.

"I am calling on boards to seek assurances from their chief executive officers that wages are being paid to employees in accordance with the law. The buck ultimately stops with the chair.

"The Fair Work Ombudsman will be conducting an investigation into Coles Group. Any employees with concerns about their pay should contact us on 13 13 94 or at www.fairwork.gov.au."

Government preparing 'vigorous, robust' laws

Federal Attorney-General Christian Porter described the case as "incredibly disappointing".

"If any more evidence was needed that this is an issue that requires a full-court press across policy for government, that evidence today came in the form of Coles," he said.

The case was "another very large instance of systemic underpayment of wages", Mr Porter said.

"Corporate Australia surely now has got the message that they need to get their house in order," he said.

"And if they haven't got that message, they're going to be absolutely and utterly compelled to in the future by the most vigorous, robust and complete set of laws around wage underpayment that Australia's ever seen."

Mr Porter said he would introduce legislation within weeks to criminalise the worst cases of worker exploitation and underpayment.

He also released a discussion paper looking at options for cases that did not meet that threshold, including preventing companies from hiring workers on certain visa types and making them disclose and publish their offences.

Gerard Dwyer, the national secretary of the Shop, Distributive and Allied Employees' Association (SDA), said Coles had worked constructively with the union throughout the review.

"The SDA also acknowledges the company's assurances that, having identified its problems, payments will be made to affected staff (including interest) and that Coles is working with the union to finalise the issues its audit has uncovered," he said.

Underpayment revealed in half-year earnings

Australia's second-biggest grocery chain posted near-flat half-year earnings today as it included a $20 million cost provision for the underpaid employees.

Earnings before interest and tax for the 27 weeks that ended on January 5 came in at $725 million compared with $722 million a year ago.

It was within the $710-730 million range the firm gave in a surprise update in early February.

Net profit for that period rose 1.7 per cent to $498 million.

Coles earlier this month said an effective Christmas campaign helped it post better-than-expected sales at its key supermarket division, while more promotional and clearance activity weighed on its liquor business.

Total sales revenue, which includes supermarkets, liquor and fuel and convenience retail businesses, rose 3.3 per cent to $18.9 billion.

Coles declared an interim dividend of 30 cents per share, its first half-year dividend since it was spun off from retail conglomerate Wesfarmers Ltd in late 2018.

ABC/Reuters