Westpac (ASX:WBC) error costs the bank $8 million

Westpac (ASX: WBC) has joined the list of ASX businesses that (inadvertently) underpaid staff recently.

About Westpac

Westpac is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business.

What happened to Westpac?

The big ASX bank is going to pay current and former employees who weren’t paid their correct long service leave entitlements due to calculation errors.

The errors led to underpayment and overpayment of some long service leave entitlements and were identified as pay of a review of payroll and long service leave.

Westpac has estimated it will need to pay around $8 million in total, including interest, to around 8,000 people. Westpac won’t ask anyone who has been overpaid to repay any money.

Westpac’s Group Executive of Enterprise Services, Alastair Welsh, said: “We apologise to anyone impacted by these errors and our priority is to make payments as soon as possible. For long service leave entitlements, different rules apply to different employees based on their employment history and work arrangements. Regrettably, our system didn’t correctly capture the right methodology every time.”

One example of what went wrong was where a change in hours worked by an employee wasn’t correctly recognised.

Summary

Various large companies have been caught out recently by wage underpayments. Woolworths (ASX: WOW), Wesfarmers (ASX: WES) and Coles (ASX: COL). It’s a shame this keeps happening because that wage money could have been spent by the employees, boosting the economy.

This news certainly doesn’t materially impact Westpac in the grand scheme of things. But it’s not exactly a positive for the bank’s reputation. I’m not a buyer of Westpac shares at the moment due to the trouble estimating how bad COVID-19 will hurt the bank this year.

Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned. 

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