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John Lewis admits £40m payroll error

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27th Aug 2013
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The John Lewis Partnership has admitted a payroll accounting error will result in payments and expenses of £40m.

Following a review of its holiday pay policy, the employee-owned retailer discovered it had not paid employees correctly for additional sums such as Sundays and bank holiday overtime.

The figures should have been higher for many staff, who will get an average of £350 extra to settle the outstanding amounts.

John Lewis Partnership confirmed human error was at fault and not its Oracle payroll/BACS software.

The partnership board that represents all its employees decided to make one-off additional payments to the 69,000 affected. The settlements go beyond the firm’s legal obligations, according to a company spokesperson.

The one-off payments later this month will be back-dated to 2006 when the payroll software was implemented. More than half of recipients will receive under £120, the company said.

The cost to the partnership will be around £40m, which will be reported in its half-year results in September.

John Lewis added that it expected future pensions liabilities to increase by around £7m as a result of the error.

Payroll systems have been updated to ensure all future holiday payments are correct, which is likely to add around 0.5% to the firm's annual pay costs.

John Lewis Partnership personnel director Tracey Killen commented that the error was discovered, “We worked quickly to make the repayments to our partners in a way that is both fair and responsible.”

Associate director of policy, research and strategic visibility at the CIPP, Karen Thomson, said the Working Time Regulations are "extremely complex" and it isn't a surprise that companies are getting it wrong.  

"The calculation of annual leave has been a bone of contention for many years, and then combine this with the cases around sickness, and should or shouldn’t leave be paid or carried forward, many employers find it difficult to understand the rules.

"John Lewis has found itself in this unfortunate position, but have acted positively and are making good the underpayments in the next available payroll run. Often the responsibility for annual leave is shared with the HR department and the payroll department," she said.

"The CIPP would encourage anyone responsible for the annual leave process to ensure they keep up to date by regularly checking their respective membership websites," Thomson added.

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By Briar
28th Aug 2013 15:57

Not on zero hours contracts then?

What a saving if they had been? As the "partners" get bonuses on the firm's performance, they will now receive those bonuses as holiday pay and lower bonuses. Null effect?

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By mikewhit
28th Aug 2013 22:19

Recalculate ?

OK, 69,000 affected, average payout stated to be £350 ... that's a total of £24.15m

Not even close to £40m ...

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