Lush underpays staff $2m in 8 years thanks to insufficient payroll infrastructure

Lush owes thousands of employees thousands of dollars each after payroll failure

Lush Australia, the national branch of a leading cosmetics firm, needs to repay more than 5000 employees a total of $2m.

Peta Granger, Lush’s national director, told reporters in Sydney that in some cases employees were owed between $5,000 and $10,000, though some “won’t be owed anything”.

“What has become alarmingly clear to us at Lush Australia is that our internal payment systems have not kept pace with our growth,” Granger said. “This resulted from a very serious failure on our part to upgrade our 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.

“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.”

Granger said the company’s manual payroll system was “just not sophisticated enough” to correctly interpret the retail and manufacturing awards (the Australian term for sets of employment entitlements), and as a result the company had sometimes failed to correctly account for overtime rates.

Lush will spend $1.5m establishing what Granger called a “transparent” repayment scheme that will allow current and former staff to check how their repayment has been calculated. It will process 200,000 hand-written time sheets and reprocess eight years worth of payroll information.

The chief executive of the NRA, Dominique Lamb, said it was likely other companies that used a manual payroll system had the same problem.

She said the rate of “minimal non-compliance” with the modern award within the retail and fast food industries was about 40%.

“I think it’s absolutely likely that if a business has been growing quite rapidly over a period of time, and has not maintained or continued to review its systems to look at how they’re paying [staff], that this could absolutely happen to them,” she said.

“If you aren’t checking your payroll systems, and exactly how you’re paying workers, this is definitely the time to make sure you’re doing it right.”

Here at Time and Attendance UK, we are very familiar with the woes of a company which has grown too large for its manual payroll system, though admittedly never to the tune of $2m!

From experience, we know that Lush’s problems will have begun before payroll even got involved, thanks to the company’s old-fashioned reliance on paper timesheets.

Not only are paper timesheets, which are generally filled weekly and retrospectively, wide open to fraud and dishonesty from workers, but they can be spoilt by simple mistakes in entry – entering a shift on Saturday afternoon instead of Friday, for example.

The next step is also fraught with human error, because in a manual payroll system someone has to read all of the timesheets (which can number in the hundreds for just one week) and enter the data by hand.

Just reading the data can be more complicated than it seems, with employee entry errors compounded by scribbling corrections and awful handwriting. Even if the person doing payroll data entry is able to read and understand all of the timesheets, they may make an unnoticed typo or two while transferring the information.

It’s like playing Chinese whispers, except with people’s eventual paychecks instead of harmless phrases.

We have a solution which has worked for companies with manual payroll systems before.

Installing our time and attendance clocking terminals takes all of the memory work and guessing games out of knowing weekly hours. The database records every single instance an employee clocks in or out from the moment it happens. Employees no longer have to worry about or waste their time recording their hours.

Neither is there any more need for laborious transfer of hours worked from paper to screen, as the Time and Attendance UK database can export all the relevant information in a format suitable for all major payroll suppliers.

Employees can clock in either using smartcards or biometric finger scans or hand scans.

If you’d like to find out more about the range of workforce management and Time and Attendance solutions supplied by Time and Attendance UK and how we can help your company implement a reliable payroll system, just contact us or Book a Demo.