Coles, one of Australia's leading supermarket chains, has recently agreed to repay over $1.5 million in unpaid long service leave entitlements to 10,698 current and former employees. This decision follows an investigation by NSW Industrial Relations, which revealed that Coles had miscalculated these entitlements by excluding allowances and bonuses from the ordinary pay calculations.
This incident is not isolated. In 2021, Coles was fined $50,000 by the Melbourne Magistrates' Court for underpaying nearly $700,000 in long service leave to over 4,000 Victorian employees. The underpayments were attributed to a clause in Coles' enterprise agreement that incorrectly 'froze' long service leave accruals during periods of unpaid leave, conflicting with the Long Service Leave Act 2018 (Vic).
Lessons for employers in relation to Long Service Leave
- Regular audits and compliance checks: Employers must routinely audit their payroll systems to ensure compliance with current legislation. Regular reviews can help identify discrepancies early, preventing large-scale underpayments.
- Accurate payroll calculations: It's crucial to include all components of an employee's remuneration, such as allowances and bonuses, when calculating entitlements like long service leave. Overlooking these can lead to significant underpayments.
- Alignment of agreements with legislation: Enterprise agreements and company policies should be regularly reviewed to ensure they align with legislative requirements. Clauses that contradict laws can lead to non-compliance and financial penalties.
- Employee education and communication: Keeping employees informed about their entitlements fosters transparency and trust. Encouraging open communication can also lead to the early detection of potential issues.
What preventative measures can you take?
- Ensure your processes to calculate LSL are appropriate: Reliance on your payroll system to correctly calculate LSL is almost always problematic.
- Seek professional advice: Regular consultations with payroll advisory services can assist professionals can help navigate complex employment laws and ensure ongoing compliance.
The Coles case underscores the importance of diligent payroll management and strict adherence to employment laws. By implementing regular audits, ensuring accurate calculations, and fostering open communication, employers can prevent similar issues and maintain trust with their workforce.
