Employment practices at Sports Direct Contents

3National minimum wage, back pay, and deductions from wages

35.The National Minimum Wage legislation requires, in broad terms, that workers are paid at the rate of the national minimum wage in respect of the hours when they are working.49 At the end of each shift, workers at the warehouse in Shirebrook are searched, to prevent goods being stolen from the warehouse. We received photographs of queues of workers waiting to be searched, resulting in bottlenecks and delays in leaving the warehouse.50 Workers did not get paid while they were being searched,51 which meant that, before Mr Ashley raised their hourly rate, workers were not being paid at the rate of the national minimum wage for their hours of work.

36.The oral evidence session put on record, for the first time, Mr Ashley’s admission that there were problems with the security procedures at the warehouse. He told us, “I am a little shocked, for example, at stuff such as bottlenecks at security, to put it mildly. I do not think that that is even slightly acceptable”.52 When we asked Mr Ashley whether he accepted that Sports Direct was effectively paying workers below the minimum wage, he replied, “on that specific point, for that specific bit of time, yes”. Mr Ashley said that “when I went to look at things such as bottlenecks, it was unacceptable. I accept that and that is why we have totally changed the process. I accept that there have been instances such as that that absolutely needed to be addressed and I hope have been and are being addressed”.53

37.The resulting average figure of £6.50 an hour, once account was taken of the time for searches, meant workers were being paid 20p below the then National Minimum Wage.54 This unlawful deduction was rectified by adding an additional 20p per hour to the hourly rate paid for the future, although the issue of back payments owed to workers—both employees and agency workers—remains unresolved.55 Mr Ashley could not categorically tell us that back pay had been paid, “Everything that I have said, I personally would like to guarantee. Have I actually checked it, looked at it, ticked the box, and seen the payments gone? Honestly, no”.56 He also told us that Sports Direct was subject to an HMRC investigation.57

38.At our oral evidence session, Mr Ashley put on record, for the first time, that workers had been paid below the minimum wage, as a result of the unpaid, compulsory searching of all workers at the Shirebrook warehouse. Mr Ashley expressed remorse at the extent of the bottlenecks at the security points. There are still questions unanswered over when back pay will be paid, as a result of these bottlenecks, and Mr Ashley told us that Sports Direct was subject to an ongoing HMRC investigation. We await their findings.

Pre-paid debit card and insurance deductions

Pre-paid debit cards issued by Transline

39.Unite’s submission describes workers employed via Transline who do not have a bank account being offered a pre-paid debit card onto which their wages are paid. Workers are charged a £10 one-off fee, a monthly management fee of £10 per month for this facility, 75p for cash withdrawals, 10p for texts to the card holder of any transactions, and £1.50 of a paper statement. Unite estimates that several hundred workers could be using the cards.58

40.The pre–paid card is administered by Contis. Its website described the benefit of the pre–paid debit card:

Use our end to end technology platform to develop your own branded, prepaid Visa debit card to drive customer loyalty and boost customer retention. Our white label service allows you to build your own bespoke prepaid debit card programme which is 100% on brand.59

41.When questioned on how much money Transline makes from the pre-paid debit cards, Jenny Hardy, the Finance Office of Transline, said that the £10 monthly fee all goes to Contis, and Transline gets a monthly rebate from commercials, “but that is not significant”.60 However, supplementary evidence from Transline stated that they do receive money from Contis:

Transline’s compliance team manages the application process, physical delivery to the place of work (by hand if urgent) and issue of replacement cards where necessary, as well as the issue of the ‘Perkz’ package which provides lifestyle discounts etc to any cardholder. To cover the cost of this service, Transline receives from Contis the sum of £3.00 per card issue and £1.96 per week for each card user.61

42.The fees received by Transline seem disproportionate to the services offered. The effect of this arrangement is to place further financial pressure on workers who are being paid only at the rate of the national minimum wage. It is not clear if this is an unlawful deduction from wages, and the costs incurred by the workers seem totally unjustified.

Insurance services

43. Unite also described a fee for “insurance services”, which is deducted from the wages of workers employed by The Best Connection: “The figure and the frequency of the deductions vary ranging from 45p to £2.45 a week. Unite has spoken to numerous workers who deny giving consent to such deductions or being given a proper explanation of what the deduction covers. Workers tell Unite that Transline operates a similar scheme”.62 Andy Sweeney, CEO of The Best Connection, described the insurance scheme as “a voluntary scheme where they can avail themselves of personal accident insurance if they wish; some do; some do not”.63 The workers “sign a declaration that they wish to have the insurance and authorise us to deduct the cost, which we transmit to the insurance company”.64 However, we heard that people do not necessarily know that they have signed up to this insurance, and they do not understand the insurance product and why they pay for it.65 If the deduction is made direct from wages without being authorised in the worker’s contract or without agreeing in writing to this deduction, it would be an unlawful deduction from wages.66

Salary sacrifice

44.Unite’s written submission describes The Best Connection’s relationship with Bestex Ltd, which provides expenses verification services for temporary workers:

Unite is unclear as to what services Bestex provides, but in addition to deductions from workers for “insurance” and charges for payment cards, is aware of a travel and subsistence salary sacrifice scheme that was operated by The Best Connection and Transline.

The salary sacrifice scheme effectively meant that workers were being paid part through wages and part through expenses and enabled agencies to minimise their and the employee’s national insurance contributions. Unite understands that the loophole was closed by HMRC on 6 April 2016.67

Deduction of pay

45.Workers have been deducted 15 minutes’ pay for clocking in just one minute late on arrival or on return from a break. When questioned, Mr Ashley said that the practice was “unacceptable” and that he would not be waiting for the results of a review, but would change it “on the first pass”.68 He told us that he did not know who had introduced the policy, but he certainly had not: “It was certainly not a policy that I put in, because I actually do not believe it is fair [ … ] If one of my kids went to work somewhere and they were two minutes late and got fined 15 minutes’ pay, I would not be very impressed by that. It is unreasonable”.69

46.Mr Ashley replied with supplementary evidence, on 12 July 2016, with the following explanation of current practice at the warehouse:

Can I be clear for the record as to what we are doing now: the system calibrates by rounding upwards in segments of five minutes. So for example, if a person is four minutes late, they will lose five minutes pay (ie: the four minutes they were late, plus an extra minute by way of rounding up to the five minute mark). This is offset by the fact that all workers are now able to clock off one minute early (as mentioned above)70 without suffering a wage penalty, thus potentially leaving them in a neutral position overall with regard to lateness.71

47.We are concerned about the legality and fairness of the voluntary schemes, such as the pre-paid debit card and the insurance scheme, to which agency workers at Shirebrook contribute. We recommend that the Gangmasters Licensing Authority look into these practices, once their remit is extended in October 2016, to ensure that such deductions are freely agreed to and are lawful.

48.We are pleased to hear that the practice of deducting 15 minutes pay for clocking in just one minute late on arrival at the warehouse, or on return from a break, has been changed. We believe these various schemes are opaque, not well communicated to the workforce and have the effect—deliberately or otherwise—of taking money from the wages of low paid workers. This is unwarranted. The system now rounds up in five-minute segments, rather than 15-minute segments. However, the system of rounding up by 5 minutes, rather than rounding down by 5 minutes, still seems ungenerous. We recommend that Mr Ashley considers rounding down, rather than rounding up, so that a worker who was four or less late would not be penalised, and a worker who was nine to five minutes’ late would be docked five minutes’ pay.

49 See the National Minimum Rage Regulations 2015.

50 Photographs not published

51 Q17 [Steve Turner]

52 Q221

53 Q277

54 The rate was £6.70 for workers aged 21 or over from 1 October 2015. The new rate following the introduction of the ‘Living Wage’ on 1 April 2016 is £7.20 an hour.

55 Q10 [Steve Turner]

56 Q223

57 Q225

58 Unite the Union Paras 2.14 and 2.15

59 Contis, home, accessed 19 July 2016

60 Qq70–71

62 Unite the Union, para 2.16

63 Q73

64 Q74

65 Unite the Union, para 2.15

66 See section 13 of the Employment Rights Act 1996

67 Unite the Union, paras 5.4 to 5.7

68 Q191

69 Q193

70 Mr Ashley’s letter refers to the fact that workers are able to clock off one minute early without suffering a wage penalty, to compensate for delays while queuing to be searched.

71 Letter 12 July 2016, Mr Ashley to Mr Wright

© Parliamentary copyright 2015

21 July 2016