LONDON (Reuters) – British retailer John Lewis said it has set aside 36 million pounds ($47 million) to cover possible costs as it may have breached UK wage rules, a potential embarrassment for a company lauded for the way it treats its staff.
The John Lewis Partnership, owner of the John Lewis department store chain and upmarket Waitrose supermarkets, said on Tuesday that while its contractual hourly rates of pay have never been below the national minimum wage (NMW), it plans to work with Britain’s revenue and customs department to see if all its arrangements meet the specific criteria of the complex regulations.
Last year the government announced a series of increases in the minimum wage, which will make it 13 percent higher than it would otherwise have been by 2020.
The John Lewis Partnership [JLP.UL] [JLPLC.UL] is often held up in Britain as an exemplary employer. It calls its staff partners and its employee-owned business model has been praised by government.
It said it is specifically looking at its practice of “pay averaging” which aims to smooth out a partner’s pay over a year to ensure a consistent amount is paid to them each month in respect of their basic pay.
“This arrangement was implemented to support partners 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 NMW regulations,” it said.
The company said that once it has completed a review, it will make any retrospective payments required to current and former partners.
Since there is a wide range of potential outcomes it said it has made the 36 million pounds an exceptional charge in its financial year to Jan. 28 2017.
The provision was detailed in the partnership’s annual report and accounts for 2016-17.
They also revealed that Chairman Charlie Mayfield has waived his bonus for 2016-17, which would have been 66,000 pounds. That decision reflected the performance of the group in the period.
Mayfield’s total reward fell by 7.4 percent to 1.41 million pounds.
In March the group reported a fall in the trading profits of both Waitrose and John Lewis department stores for 2016-17. It also cut its staff bonus to 6 percent, the lowest percentage payout since 1954, saying it needed to preserve cash to brace for difficult times ahead.
In April the department store business said it would cut hundreds of jobs in a reorganization of its soft furnishings business and changes to the way it operates its in-store restaurants.
(Reporting by James Davey; Editing by Alistair Smout and Susan Fenton)