The Business Herald’s markets and banking reporter.

Dick Smith may have underpaid staff by A$2m

Dick Smith operates 393 outlets, including 62 stores in New Zealand and went in to receivership on January 5. Photo / Ross Setford
Dick Smith operates 393 outlets, including 62 stores in New Zealand and went in to receivership on January 5. Photo / Ross Setford

Dick Smith may have underpaid Australian staff by A$2 million for annual leave entitlements dating back to 2010, according to the firm's receivers.

The electronics chain collapsed into receivership on January 5, owing around A$390 million to creditors.

Receivers Ferrier Hodgson said an issue had been identified relating to the historical calculation and payment of annual leave loading for employees of Australian stores.

New Zealand staff are not affected.

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"Based on our investigations to date, we understand that up to 3200 current and former employees of the Australian business may have been underpaid their annual leave loading entitlements, potentially dating back to 2010," Ferrier Hodgson's James Stewart said in a statement.

That would mean the potential underpayment began when Dick Smith was still owned by supermarket operator Woolworths.

Private equity firm Anchorage Capital purchased the business from Woolworths in 2012, before floating it on the Australian stock exchange the following year.

Stewart said the underpayment, which totaled around A$2 million, appeared to "reflect an incorrect application of the relevant industrial award".

Meanwhile, Dick Smith's chief financial officer Michael Potts has lost his job in a restructuring that resulted in 22 positions being cut at the firm's Sydney support office.

Potts - who joined the retailer in September 2013, three months before the firm's ASX listing - has been replaced by Bert van der Velde, who has taken over as interim chief financial officer.

Receivers Ferrier Hodgson said van der Velde had over 25 years of experience in Australia, Asia and Europe, including previous roles with Woolworths, Eldorado Company and Metro Cash and Carry.

Dick Smith's former chief executive Nick Abboud resigned last month and was replaced by interim CEO Don Grover.

The ongoing restructuring of the business is a necessary step in creating a leaner organisation going forward while our discussions with interested parties continue.

Ferrier Hodgson has reportedly received more than 50 expressions of interest from potential buyers for the business.

"The ongoing restructuring of the business is a necessary step in creating a leaner organisation going forward while our discussions with interested parties continue," Stewart said.

Dick Smith operates 393 outlets, including 62 stores in New Zealand and those operated under its Move sub-brand in Australia.

The receivership came after the retailer abandoned its profit forecast in December amid a sales slump that left the firm with high levels of excess stock, which had to be heavily discounted in the lead-up to Christmas.

Gift card holders and customers who placed deposits on products are on a list of unsecured creditors owed around A$250 million.

- NZ Herald

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