Government name and shame

Earlier this month, Argos was fined £1.5 million by HM Revenue & Customs for failure to pay the National Minimum Wage (NMW). The retail giant, now owned by Sainsbury’s, will pay HMRC a discounted sum of £800,000 for agreeing to pay within 14 days. Argos will also have to pay 37,000 workers a total sum of £2.4 million for underpayments of approximately £64 per person.

As mentioned in our newsletter in November last year, an individual cannot opt out of their employment right to the NMW, and the respective rate is subject to yearly review by the government. The rate for all working people aged 25 and over is currently set at £7.20 and from 1 April 2017 will increase to £7.50.

The underpayment at Argos emerged after the Department for Business, Energy & Industrial Strategy and MP Margot James named and shamed a record 359 companies on the 15th February for failing to pay either the NMW or the National Living Wage (NLW). Employers who failed to pay the NLW, which is currently £7.20 for workers aged 25 and over, were named and shamed for the first time in this press release. The businesses named were predominately in the hospitality industry, including a large number of hair salons, hotels, care homes and retailers.

Debenhams, is another example of a high street name which also breached the NMW in relation to its workers. The well-known department store was fined £63,000 and forced to pay back £135,000 to 12,000 workers. Sports Direct workers also received £1 million after an HMRC investigation last year.

Argos Chief executive, John Rogers, said in a letter to staff that there was an issue with some of the Argos store systems and processes, which meant that some workers had been underpaid. In particular, this was related to the timings of staff briefings and security searches, which could happen before or after staff shifts. Similarly, Debenhams, stated that it had underpaid staff by an average of £10 in 2015 due to a technical glitch in its payroll calculations. Other reasons given for underpaying workers included docking workers’ wages to pay for their Christmas party, using tips to top up pay or making staff pay for their own uniforms out of their salary.

In any case, it is clear that the government aims to penalise businesses which are non-compliant. By naming and shaming these companies, the government intends to inspire public confidence in HMRC’s ability to enforce the NMW legislation. Employers also need to consider the fact that persistent failure to pay the NMW could lead to a criminal investigation and be mindful of the serious and damaging reputational consequences of being publicly shamed by the government.

Dominic Bonham