Failing to pay the minimum wage is never a good look for an employer – but even less so during the cost of living crisis.

But apparently, some of the country’s retailers are failing on just that. M&S, Argos, WH Smith and Lloyds Pharmacy were last week among more than 200 companies named by the Department for Business & Trade for failing to pay the minimum wage.

Employers on the list were ordered to repay workers breaches that left 63,000 of them out of pocket, and faced penalties of nearly £7m.

The scale of the underpayments by the four major retailers ranged from just over £1m by WH Smith to £480,000 by Argos, according to HMRC figures.

But the sums don’t necessarily reflect a material shortfall in pay prior to HRMC’s intervention.

In the case of M&S, for example, the breach is said to have arisen from the payment cycle for an intake of temporary Christmas workers about five years ago.

The workers were paid two weeks in arrears, receiving payment for week one at the end of their second week of employment, and payment for week two at the end of their third week, and so on.

Workers had been paid above the minimum wage

Because payments did not reach the minimum wage threshold for work completed up to that point, HMRC deemed there to be a shortfall.

By the final payment cycle, M&S workers had paid the workers above the minimum wage for all work completed, but the retailer then had to give them a week’s extra pay to cover the shortfall as identified by HMRC.

“Like many other organisations, M&S is only named in the national minimum list because of an unintentional technical issue from over four years ago,” says a spokesman for the retailer.

“This happened simply because temporary colleagues were not paid within the strict time periods specified in the national minimum wage regulations and was remedied as soon as we became aware of the issue.

“Our minimum hourly pay has never been below the national minimum wage. It is currently above it and no colleagues were ever underpaid because of this.”

 “It’s not uncommon for companies to make mistakes that could land them in hot water”

Katie Ash, head of employment law at Banner Jones Solicitors, agrees with M&S’s assessment that such unintentional technical breaches are common.

“While most businesses take steps to ensure workers are paid correctly in line with any changes, it’s not uncommon for companies to make mistakes that could land them in hot water,” Ash says.

Argos’ underpayments are also said to have been unintentional, arising from a payroll error dating back to 2012, before Sainsbury’s acquisition of the business. The error was put right at the time, according to a Sainsbury’s spokesman.

It’s a similar situation for Lloyds Pharmacy: unintentional underpayments dating back to 2019, which were rectified as soon as Lloyds became of aware of them, according to the retailer.

WH Smith, too, blames a “genuine error” which was “rectified immediately with all colleagues reimbursed in 2019”. 

‘There is no excuse for underpaying workers’

The Department for Business & Trade itself has acknowledged in its list that “not all minimum wage underpayments are intentional”, while maintaining “there is no excuse for underpaying workers”. It has not said how many of the 200 cases were apparently unintentional technical breaches as opposed to intentional material breaches.

The government department said it could not comment on individual cases and all UK businesses had the opportunity to appeal if they had evidence to prove they shouldn’t be named.

Mistakes and unintentional technical breaches by some of the country’s best-known companies help HMRC make headlines with its list, thereby sending a warning to the thousands of smaller companies who may be guilty of intentionally and materially flouting the rules, argues a source at one retailer.

But if that’s so, big retailers have had fair warning too, since this is not the first time one of their number has been called out in HMRC’s ‘name and shame’ list. In 2021 it was John Lewis, but the breach in question had happened four years earlier, had already been fixed and made public at the time, the retailer said in its defence.

Breaches on technicalities are, after all, still breaches, and with all their resources it should be possible for major retailers to know the rules and avoid them.

“Understanding the law around the national minimum wage should help employers avoid falling foul of the legislation,” says Ash.

“This includes ensuring that the pay paid in a particular period is sufficient to meet the national minimum wage for the work undertaken in that period, and ensuring rigorous systems, which take account of the rules, are in place.”

Topics