Employers reimburse staff by £1 million after failing to pay national minimum wage

The worst offenders were companies in the retail, hairdressing and hospitality industries. 

The UK government has ordered 360 organisations to pay back nearly £1 million to more than 15,500 workers after failing to pay them the national minimum or national living wage.

The worst offenders were employers in the retail, hairdressing and hospitality industries, with department store Debenhams topping the list. It had to repay £134,000 to over 11,000 staff – more than half of its shop workers – as it underpaid them by an average of £11 each per pay cheque during 2015. The company was also fined £63,000. 

Debenhams was one of a number of organisations that blamed admin errors for their appearance on the list. It claimed that the mistake took place due to a misinterpretation of the number of weeks that should have been used when calculating pay. Although there are 52 weeks in a calendar year, HMRC mandates there are 52.17 for payroll purposes.

The Global Payroll Association’s chief executive Melanie Pizzey said: “Technical errors in payroll, especially in large organisations, are uncommon. A large organisation like Debenhams would have dedicated HR and payroll specialists and sophisticated payroll and HR software that has a range of in-built rules and exception reports produced each pay period.”

She added that, while the cause of the technical error was unclear, the company should consider reviewing how its payroll and HR software and business rules were configured to ensure they were set up correctly and there were no conflicts.

A Debenhams spokesperson responded: “As a responsible employer, Debenhams is committed to the national minimum wage and, as soon as the error was identified by a routine HMRC audit last year, we reimbursed all those affected. We have apologised to all our colleagues affected and have taken steps to ensure it cannot happen again.” 

Other excuses put forward by employers for failing to pay employees the full amount included using tips to top up their wages, making deductions to fund Christmas parties and making staff pay for their own uniforms. 

The Office for National Statistics estimates that 1.3% of employees are not being paid the minimum wage, the equivalent of 178,000 full-time workers and 184,000 part-time staff. The 360 businesses that broke the law were fined a total of £800,000. They included clothing store Peacocks, Lloyds Pharmacy and a number of Subway franchises.

For the first time, the list also included companies that failed to pay the national living wage, which was introduced on 1 April 2016 for workers over the age of 25.