£36 million price tag for minimum wage mistake

John Lewis Partnership has found itself falling foul of minimum wage rules. The error has led them to set aside £36 million to cover potential back payments to staff who have been underpaid.

The group, which runs John Lewis department stores and Waitrose supermarkets, acknowledged that a payroll mistake had negatively affected those workers who have been paid hourly over the last six years.

The reason for the mistake was their practice of “pay averaging”, whereby workers are paid the same each month, regardless of the number of hours they have worked each month. This means although they receive the right pay over the year, some workers’ pay fell below the national minimum wage rates for some months when they had worked more than average hours.

It is not yet known how many employees have been affected by the error but £36 million has been set aside. They announced that once they have undertaken a proper review, they will make the necessary payments. They have also confirmed that they are now in discussions with the HRMC to ensure minimum wage compliance.

A few years ago, John Lewis also found themselves in a bit of bother after they realised that they had miscalculated holiday pay for seven years, costing them £40 million!

Not the only one…

Unfortunately John Lewis is not the first to suffer this embarrassing gaffe and it is unlikely it will be the last.

Another retail giant Debenhams had to repay nearly £135,000 after a “technical error in its payroll calculations” meant that they owed 11,800 workers approximately £11 in wages each.

Tesco also admitted that it suffered from a payroll error. They were forced to pay almost £10million in back pay to 140,000 current and former workers who were underpaid.

Don’t get minimum wage rules wrong! Seek legal advice from our Employment Law Advisers and avoid huge pay outs and reputational damage.

Director of Legal Services

James Tamm

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