The Westpac Banking Corp (ASX: WBC) share price was out of form on Friday and dropped lower.
The banking giant’s shares fell almost 0.5% to $18.54.
Why did the Westpac share price drop lower?
Investors appear to have been selling the banking giant’s shares after it admitted to underpaying some of its staff.
According to a media release, Westpac will be remediating current and former employees who were not paid their correct long service leave entitlements due to some calculation errors.
Westpac advised that the errors led to underpayment and overpayment of some long service leave entitlements. These errors were identified as part of a wider review of its payroll and long service leave arrangements.
The bank explained that in some instances, it found that the wrong rules were inadvertently applied in Westpac’s payroll system. This then affected people’s long service leave entitlements.
What is the damage?
At present, the bank estimates that it will be paying approximately $8 million in total to around 8,000 people who were underpaid their long service leave. This figure includes interest.
The good news for those that were overpaid, is that Westpac will not be asking anyone who has been overpaid to repay any money.
Westpac’s Group Executive of Enterprise Services, Alastair Welsh, commented: “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,” he added.
Westpac will now put in place measures to ensure that this doesn’t happen again and that future long service leave is correctly calculated.
“We are committed to putting things right for our people and preventing the issue from re-occurring, and we will continue to check our processes to ensure employees receive their correct entitlements,” Mr Welsh concluded.
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.