Tesco to back pay staff after salary sacrifice-linked living wage error

Retail organisation Tesco is to provide back pay to 140,000 former and current employees after it was found that their pay fell below the national living wage after salary sacrifice deductions.

An internal review of Tesco’s reward system found that some employees were being left with a base salary below the national living wage after making voluntary salary sacrifice contributions for benefits such as pensions, childcare vouchers, and bikes-for-work schemes.

The organisation is in the process of contacting affected staff, who will receive reimbursement payments of up to £40 per employee by the end of March 2017. The total reimbursement costs are expected to reach £9.7 million.

The payroll review, which was conducted as part of the implementation process for a new payroll system, checked all 320,000 UK-based employees’ pay for the past six years.

The national living wage, which is the statutory rate for employees aged 25 and over, is currently £7.20 an hour. It will increase to £7.50 an hour from April 2017.

Tesco has notified both HM Revenue and Customs (HMRC) and trade union Usdaw about the reimbursements.

Matt Davies, UK and Republic of Ireland chief executive officer at Tesco, said: “As soon as our own review identified this issue we took immediate action to resolve it and establish which [employees] are affected.

“We’ve apologised to our [employees] and our priority now is to talk to them about how this affects them individually, and make any necessary payments. We expect payments to be up to £40 for the majority of affected [employees].”