John Lewis has made a £36m provision for potential costs of paying the national minimum wage, as it systems may not comply with regulations.
In its annual report and accounts published on 9 May, John Lewis said its hourly pay has never been below the minimum wage, but it was making the provision to comply with “strict timing requirements” for complying with the regulations.
John Lewis practises pay averaging, which regulates employees’ pay over a year to give them a consistent amount every month. It now thinks this practice may not meet the timing required for the national minimum wage.
The retailer said when it has completed its review it will make retrospective payments to current and former employees. The provision will cover back pay and as well as employer’s National Insurance, pension costs and other associated costs.
Sir Charlie Mayfield, chairman of the John Lewis partnership said: “Arrangements have already been made to make these payments and contact former partners. HMRC are aware and we intend to work with them in order to resolve some of the key points regarding the way the national minimum wage regulations apply to our pay arrangements and practices. We expect to do this as quickly as possible. However, it is likely these discussions will take some time to be completed.”
Separately, Mayfield has waived his £66,000 bonus for the 2016/17 financial year.
Last month the business revealed that employees will receive a bonus of 6% of annual salary, down from 10% last year, as the board decided to retain more of its annual profits to strengthen its balance sheet.
During the year Mayfield’s basic pay was 4.9% higher than 2015/16 at £1.1m.