John Lewis (LON:JLH) is working with HMRC to smooth over a payroll error that breached the minimum wage laws.
The British retailer has had to set aside £36 million after finding that its staff rota systems did not comply with the government’s national minimum wage.
The errors found have affected all members of staff that have affected for an hourly rate over the past six years. As a result, former and current John Lewis employees could receive a top-up in back pay as a result of the review.
The error was discovered after an employee raised issues with their monthly pay after the retailers posted the yearly results in March. The group said that workers received the correct pay over 2016, but when employees on hourly rates worked more than average pay fell below the national minimum rate required by law due to the pay averaging system.
Due to the costs involved, the retailer has revised its 2016-17 pre-tax profits to £541 million, down from £577 million.
“This arrangement was implemented to support [staff] with a steady and reliable monthly income, but we now believe this arrangement may not meet the strict timing requirements for calculating compliance with the national minimum wage regulations,” said John Lewis.
As a result of the error, the chairman Sir Charlie Mayfield has said he plans to waive his £66,000 bonus this year.
The £36 million pay mix-up comes three years after the group was forced to pay employees an extra £40 million after it realised it had been miscalculating holiday pay for the past seven years.
John Lewis is planning to cut 387 jobs this year as part of an overhaul of its cafes and restaurants. They also announced in January of their plans to cut the annual staff bonus by four percent in order to retain profit to invest online – giving employees a bonus of six percent compared to their 10 percent bonus last year.