When errors are a feature, not a bug

Woolworths are burning shareholder value in the latest wages underpayment “scandal” in Australia.

“Scandal” is presented in inverted commas because, frankly, it’s becoming easier to list the organisations not caught up in this problem than those who have.

After self-reporting their heinous crime, Woolworths have presumably poured hundreds of thousands of dollars into one of the big four accounting firms to get to the bottom of the problem.

In addition to the subsequent remediation costs (project resources, IT costs, management time and, obviously, the repayments to staff), they now have a class action to defend.

From the article, we can unpick the top level maths involved:

6,000 staff have been underpaid somewhere between $200 and $300 million since 2010 (let’s assume May 2010, as it seems an EBA was signed then).

So, a sensitivity analysis of this:

Worst case – $300,000,000 / 6,000 / 103 months = $485 a month or about $24 a day

Least worst case – $300,000,000 / 6,000 / 103 months = $323 a month, or about $16 a day

Not insignificant but not the difference between cashed up and struggle street either. It’s the equivalent of having to pay for your car parking if you work in a metropolitan area.

What isn’t explained is what the source and reason for these errors is likely to be. Is it an under calculation of pay, superannuation contributions, rostered days off, over-calculation of tax, etc.

Consider those questions when you read of these “underpayment” cases.

A lifetime ago, I worked in various jobs which involved variable pay for reasons such as overnight shift work, weekends and public holidays.

Every month when the pay packet arrived I would spend a few minutes with my diary and a calculator and check the numbers. Mainly the payroll department’s calculation was correct but there were several occasions where I found an issue to be corrected (always in my favour – strangely, I never mentioned the other ones).

I doubt I’d be capable of performing that check and balance if I were employed in a similar role in Australia in 2019. I’d be impressed if many of the current variable wage-earners could do so either.

Actually, if they could accurately calculate their wages, they’re missing a huge career opportunity to switch to working in payroll.

Bill’s Opinion

We’ve investigated these issues previously and explained why we think it’s a feature, not a bug of the Australian employment environment.

There are some heuristics when discussing this epidemic of Australian payroll “scandals”:

– You will never meet anyone in Australia who earns minimum wage. That’s not to say nobody earns at that rate, but there’s so few of them you stand little to no chance of ever meeting one.

– Anyone who claims to understand how to calculate payroll based on Australian Enterprise Bargaining Agreements is not to be trusted. Do not, I repeat, do not buy a used car from these people. I know payroll accounting managers with decades of experience who, in a quiet moment in the pub, will admit to not being certain about these calculations and waking up at night worrying about it.

– Any worker who claims to have been underpaid has only come to this conclusion after being told so by an “expert” (see the previous point).

– The reporting on these issues will never mention the labyrinthine employment regulations in Australia as being even partially-responsible for these screw ups.

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