The BHP Group Ltd (ASX: BHP) share price initially dropped around 1% after the announcement of US$280 million of wage underpayment relating to annual leave.
But, it’s currently higher amid positive news on the US debt ceiling approval.
Employee allowances and entitlements underpaid
The ASX mining share said that it has “identified issues with certain allowances and entitlements affecting a number of its current and former employees in Australia”.
Some employees in its Australian operations had leave “incorrectly deducted on public holidays since 2010.”
BHP said that there are around 28,500 affected current and former employees with an average of six leave days in total that have been incorrectly deducted from affected employees over a 13-year period.
The company’s initial investigations suggest that OZ Minerals have been affected by a similar leave deduction issue before being acquired by BHP.
BHP also said that it had identified approximately 400 current and former employees at Port Hedland are entitled to “additional allowances due to an error with the employment entity in their contract.”
Massive cost
BHP acknowledged that the estimated cost of remediating the leave issue and the contracting issue will be up to US$280 million before tax, including the cost associated with superannuation and interest payments. Understandably, that’s negative news for the BHP share price.
The ASX mining share said that it’s continuing to investigate and an update will be provided in its full year result in August.
BHP said that it has self-reported to the Fair Work Ombudsman, and engaged Protiviti, a global assurance firm, to conduct a thorough review of BHP’s payroll systems.
Leadership commentary
BHP’s Australian President, Geraldine Slattery, said:
We are sorry to all current and former employees impacted by these errors. This is not good enough and falls short of the standards we expect at BHP. We are working to rectify and remediate these issues, with interest as quickly as possible.
Final thoughts on the BHP share price
This doesn’t make BHP look very good, but the next thing is to do right by the workers quickly and with remorse. It’s cheaper than it was earlier this year, which could mean it’s better value.
But it depends what commodity prices do in the medium-term. If iron keeps falling then the BHP share price may keep dropping. But, I like the ASX mining share’s expansion into copper and nickel.
