Tesco – Every little helps after payroll fiasco

10th March 2017

TescoJust a few days after the Debenhams naming and shaming by the HMRC, Tesco has become the latest high-profile business to suffer reputational damage from payroll issues.

The supermarket giant is reeling after finding that 140,000 current and former staff have been underpaid due to a payroll error.

It’s a further wake-up call to businesses to get on top of the complex arrangements for National Living Wage, National Minimum Wage, and other statutory requirements.

For payroll teams across the UK this is not good news. The issues at Debenhams will yet again put a spotlight and pile even more pressure on internal payroll teams, as senior teams will seek reassurance that the company reputation is not at risk.

It is estimated that Tesco will pay out £10m plus to workers. with most workers getting up to £40, although some could get much more.

The error was picked up as the company changed to a new payroll, but Neil Lagden, Director at IRIS FMP, thinks this was too late. “We always encourage internal payroll teams to audit and review payroll regularly to ensure that these sort of mistakes cannot occur. I’m surprised that this wasn’t picked up sooner as good payroll software, such at IRIS FMP Payrite, allows you to run these reports each month to check that you’re compliant. What’s worse at Tesco is that this problem went back six years. ”

Apart from the appalling damage to reputation, Tesco will have a tough job on its hands tracking down the 40,000 or so ex-employees who will need to be repaid an average of £40. They’ll also have to deal with a potential drop in morale and commitment from staff, who may feel short-changed by the whole debacle. It certainly doesn’t help Tesco to become an ’employer of choice’ in the retail industry.

From a reputation viewpoint, Tesco have been open and transparent, admitting their mistake. Managing your reputation when errors occur can be tricky since the rise of social media can mean unwelcome news is out there before you know it. Our advice is always to be on the front foot, managing the situation rather than reacting  and playing catch up.

Our article ends with the Tesco slogan ‘Every Little Helps’. The National Living Wage rises to £7.50 an hour next month. If nothing else make sure your payroll takes account of this change.