How Michael Hill Jewellers Underpaid Workers $25 Million: Technical Breakdown
You can have the right award, the right employees, and the right payroll system -- and still get it wrong if the award provisions are interpreted incorrectly. A single misinterpretation can create millions in liability.
Michael Hill International operates over 300 jewellery stores globally. In 2019, a review by PricewaterhouseCoopers uncovered that the company had been misapplying the General Retail Industry Award for six years, resulting in estimated underpayments of between $10 million and $25 million to its Australian workforce.
The case is notable for its cause: not a deliberate attempt to underpay, but a fundamental misunderstanding of how the award should be applied. The company thought it was paying correctly. It was not.
What Happened
Michael Hill engaged PwC to review its payroll practices. The review found that the General Retail Industry Award 2010 had been misapplied across the company's Australian operations for six financial years.
Timeline
- 2013-2019: Misapplication of the retail award across Australian stores
- July 2019: PwC review findings disclosed by new CEO Daniel Bracken
- 2019: Company contacted all affected staff with apology and remediation process
- 2019: Fair Work Ombudsman announced it would contact Michael Hill
- 2019-2020: Detailed review of all employee records, rostering practices, and payments
The Numbers
| Metric | Detail |
|---|---|
| Estimated underpayment | $10-25 million |
| Period | Six financial years (approx. 2013-2019) |
| Stores in Australia | 160+ |
| Global employees | ~2,600 |
| Award involved | General Retail Industry Award 2010 |
| Discovery method | PwC external audit |
The Technical Failure
Internal payroll teams can be confidently wrong for years. The error was only found when an external auditor looked at it with fresh eyes.
Award Misapplication vs Award Misidentification
The Michael Hill case is distinct from the Domino's case (wrong award entirely) and the Woolworths/Coles case (set-off clause failure). Michael Hill identified the correct award -- the General Retail Industry Award 2010 -- but applied its provisions incorrectly.
While the specific details of the misapplication have not been fully disclosed, common retail award misapplication errors include:
1. Classification Level Errors
The General Retail Industry Award has eight classification levels, each with a different base rate:
| Level | Description | Typical Role |
|---|---|---|
| 1 | Retail Employee Level 1 | New starter, basic duties |
| 2 | Retail Employee Level 2 | Experienced sales assistant |
| 3 | Retail Employee Level 3 | Specialist knowledge required |
| 4 | Retail Employee Level 4 | Supervisory, trade-qualified |
| 5 | Retail Employee Level 5 | In-charge of section |
| 6 | Retail Employee Level 6 | In-charge of store |
| 7 | Retail Employee Level 7 | In-charge of large store |
| 8 | Retail Employee Level 8 | In-charge of multiple stores |
Jewellery retail staff with specialist product knowledge (gemstones, precious metals, watchmaking) may warrant classification at a higher level than standard retail. If Michael Hill classified specialist staff at Level 1 or 2 when they should have been at Level 3 or higher, every subsequent calculation -- overtime, penalties, loadings -- would be underpaid because they are all percentages of the base rate.
2. Penalty Rate Calculation Errors
Jewellery retail involves significant weekend and public holiday trading. The General Retail Industry Award specifies:
- Saturday: 125% (full-time/part-time), 150% (casual)
- Sunday: 200% (full-time/part-time), 200% (casual)
- Public holidays: 250%
- Evening work (6pm-midnight): Additional loading
If these rates were calculated on an incorrect base rate, or not applied to all qualifying hours, the underpayment compounds rapidly across 160+ stores and six years.
3. Rostering and Part-Time Agreement Errors
Part-time employees under the General Retail Industry Award must have a written agreement specifying their regular pattern of work, including:
- Days of the week they will work
- Starting and finishing times
- The number of hours to be worked each day
Hours worked outside this agreed pattern must be paid at overtime rates. If Michael Hill did not maintain these agreements -- or did not pay overtime for hours outside the pattern -- this would create systematic underpayments. (This is the same issue that cost Sunglass Hut $2.3 million.)
4. Allowance Omissions
The General Retail Industry Award provides for various allowances that are easy to overlook:
- Laundry allowance (if uniforms are required)
- First aid allowance
- Meal allowances for overtime
- Higher duties allowance
If these were not paid, or not paid at the correct rate, the cumulative effect over six years and thousands of employees would be substantial.
The misapplication trap -- You can have the right award, the right employees, and the right payroll system -- and still get it wrong if the award provisions are interpreted incorrectly. Awards are complex legal documents, and a single misinterpretation can create millions in liability.
How It Could Have Been Detected Earlier
Use an independent compliance tool to validate your payroll configuration against the award's actual provisions. Do not rely solely on internal payroll team interpretations.
The PwC Discovery Problem
Michael Hill's underpayment was discovered by an external auditor (PwC), not by internal systems. This means:
- The company's internal payroll checks did not identify the misapplication
- The payroll system was configured based on an incorrect interpretation of the award
- Nobody internally questioned whether the configuration was correct for six years
What Automated Compliance Would Have Caught
Award interpretation validation: An automated system with the General Retail Industry Award encoded would have flagged any deviation from the award's requirements -- incorrect rates, missing allowances, or wrong classification levels.
Rate comparison alerts: Automated comparison of actual pay rates against the current award rates (which change annually with Fair Work Commission increases) would have identified any shortfall.
Part-time agreement compliance: Automated monitoring of part-time employee hours against their agreed patterns, with overtime flagging for out-of-pattern hours.
Annual award increase application: Awards change every year. An automated system would ensure new rates are applied from the correct date, preventing the common error of delayed implementation.
How AirComply Prevents This
Encoded Award Provisions
AirComply has every provision of every Modern Award encoded and regularly updated. This includes classification levels, base rates, penalty rates, overtime thresholds, allowances, and leave entitlements. The interpretation is built into the system -- not left to individual payroll operators.
Classification Guidance
AirComply provides guidance on the correct classification level based on the employee's actual duties, qualifications, and responsibilities. This prevents the common error of defaulting all employees to the lowest classification level.
Automatic Rate Updates
When the Fair Work Commission adjusts award rates (typically annually), AirComply updates automatically. Employers do not need to manually update payroll configurations -- the correct rates are applied from the correct date.
Allowance Checklist
AirComply identifies all allowances applicable to each employee under their award and verifies they are being paid. Missing allowances are flagged, preventing the slow accumulation of underpaid entitlements.
When award rates change annually, use an independent automated system to ensure new rates are applied from the correct date, preventing the common error of delayed implementation.
Key Takeaways
The General Retail Industry Award is involved in more underpayment cases than any other -- Woolworths, Coles, Super Retail Group, Sunglass Hut, and Michael Hill. Retail is the most common industry for underpayment.
Misapplication is as expensive as non-application. Michael Hill used the right award but applied it wrong. The result was the same as not applying it at all: $10-25 million in underpayments.
Internal payroll teams can be confidently wrong. For six years, nobody at Michael Hill questioned the award interpretation. The error was only found when an external auditor looked at it with fresh eyes.
External audits are expensive and retrospective. PwC's audit found the problem, but it took six years of accumulation before it was commissioned. Continuous automated monitoring would have caught it in the first pay period.
Retail is the most common industry for underpayment. The General Retail Industry Award is involved in more underpayment cases than any other -- Woolworths, Coles, Super Retail Group, Sunglass Hut, and now Michael Hill.
The bottom line -- Michael Hill thought it was paying correctly. It was not. The General Retail Industry Award is one of the most complex awards in the system, and a six-year misapplication created up to $25 million in liability. If you rely on manual award interpretation, you are trusting that the person who configured your payroll got every clause right. History says they probably did not.
AirComply encodes every provision of the General Retail Industry Award. Check your compliance now.