Ms Granger said the issue stemmed from the company’s reliance on manual pay processes and its failure to update to more suitable software to keep up with business growth.
“We are here to say sorry and take ownership of some serious failings,” Ms Granger said.
“What has become alarmingly clear to us at Lush Australia is that our internal payroll systems have not kept pace with our growth. In recent months we have unearthed some serious miscalculations of people’s pay.
"We should have had far more respect for our people's pay and upgraded our payroll infrastructure to keep up with the growth of our business.
Source: Lush Australia Facebook
Lush has said the issue affects mostly part-time workers and some employees may be owed up to $10,000 in back pay.
The company currently employs about 700 people. Audits into the pay failure are ongoing but Lush has identified the issue affects employees from 2010 onwards.
Ms Granger confirmed Lush had breached three areas of the retail award. Lush's pay office hadn't paid overtime when part-time staff worked an extra day and was failing to pay extra when staff didn't get a 12-hour break between shifts.
“Knowing what we know now, It was irresponsible to imagine that such a manual and outdated system could possibly work on a business our size,” she said.
“I want to be absolutely clear we would never knowingly underpay our staff. It is not deliberate and goes against everything we value and believe in at Lush. “
The National Retailers Association (NRA) says it's "absolutely likely" many more retailers are underpaying staff and that the Lush findings should be considered a warning to others.
NRA chief executive Dominique Lamb said pay rates, terms of references and classifications in modern awards can change frequently.
"This is definitely the time to get it right," she said.
Payroll education body the Australian Payroll Association isn't surprised another major company has underpaid staff.
"Employers need to take responsibility for their payroll departments - which they are not doing," chief executive Tracy Angwin told AAP.
Ms Granger said the company has reported themselves to the Fair Work Ombudsman and unions.
A Fair Work Ombudsman spokesman confirmed the FWO had been contacted by Lush on Tuesday “to self-report non-compliance with its workplace obligations”.
“The FWO will make independent inquiries of Lush to assess the extent and nature of non-compliance, and ensure appropriate rectification and compliance outcome.”
Lush’s People and Support manager Amy Lyons said casual workers were the least affected by the issue. The company mostly employs casual workers.
When asked why employees should continue to trust Lush as an employer, Ms Lyons said the company would be investing in “complete transparency” in the future.
“We understand it might take a little while for employees to trust us to get their pay correct,” she said.
If you believe you are affected by the Lush pay issue click here.
The Fair Work Ombudsman urges any employee seeking advice to contact the Fair Work Infoline on 13 13 94 or click here.
Source: Lush Australia Facebook
How did this happen?
Lush’s directors claim the company’s fast growth was the reason for the oversight. They say they failed to upgrade their payroll to meet this growth. 5000 current and former staff since 2010 are affected and the company says they believe they owe as much as $2m collectively.
How was it discovered?
The problem was flagged in August 2017 and an investigation followed. This resulted in confirmation that the Retail Award had been breached. Lush then employed an external payroll company to figure out how much they owed to staff.
How will it be fixed?
Lush say they’re doing everything they can to rectify the issue – this includes putting a new payroll system in place to recalculate what back pay is owed to each staff member. The company says staff will be paid every cent owed including interest.
Lush says they are investing $1.5m in the new payroll system and about 200,000 timesheets dating back to 2010 will be manually entered for transparency. They say the recalculated pay will be ready to be paid to staff by December 2018.
- With AAP