Australian supermarket giant Coles has committed to backpaying more than $1.5 million in unpaid long service leave (LSL) entitlements to 10,698 current and former employees. This follows an investigation by NSW Industrial Relations, which found the company had miscalculated LSL entitlements by excluding allowances and bonuses from the ordinary pay calculations.
A Recurring Issue
This isn’t the first time Coles has faced scrutiny over long service leave. In 2021, the Melbourne Magistrates’ Court fined the company $50,000 for underpaying nearly $700,000 in LSL to over 4,000 Victorian employees. That case involved a clause in Coles’ enterprise agreement that wrongly paused LSL accrual during unpaid leave, breaching the Long Service Leave Act 2018 (Vic).
Key Lessons for Employers
These incidents highlight the importance of robust payroll practices and compliance with long service leave laws. To avoid similar pitfalls, employers should consider the following steps:
- Regular Audits and Compliance Checks
Conduct routine payroll audits to ensure compliance with the latest legislation. Early detection of discrepancies can prevent widespread underpayments. - Accurate Payroll Calculations
Include all relevant components of remuneration—such as allowances and bonuses—when calculating entitlements. Exclusions can lead to significant underpayments. - Alignment of Policies with Legislation
Regularly review enterprise agreements and company policies to ensure they adhere to applicable laws. Clauses that conflict with legislation can result in non-compliance and financial penalties. - Employee Education and Communication
Inform employees about their entitlements to foster trust and transparency. Open communication channels can help identify potential issues early.
Preventative Measures
Employers can take proactive steps to prevent LSL underpayment issues:
- Review LSL Calculation Processes
Don’t solely rely on payroll systems to calculate LSL entitlements. Manual verification or external validation can help identify errors. - Seek Expert Advice
Engage payroll advisory services or legal professionals to navigate complex employment laws and ensure compliance with changing regulations.
A Cautionary Tale
The Coles case serves as a reminder of the critical importance of diligent payroll management and adherence to employment laws. By implementing regular compliance reviews, ensuring accurate calculations, and maintaining open communication, employers can avoid costly mistakes, safeguard employee trust, and uphold their legal obligations.
