NEWS
31/12/2020 00:01 GMT | Updated 31/12/2020 08:55 GMT

New Year's Honours: Ex-Tesco CEO Knighted As It's Revealed Supermarket Did Not Pay Minimum Wage

Dave Lewis has been made a Sir for transforming the finances of the supermarket giant.

Former Tesco boss Dave Lewis has been knighted for transforming the fortunes of the supermarket giant – even as the government named and shamed the company for failing to pay tens of thousands of workers the minimum wage.

Tesco claims it “inadvertently” failed to pay a total £5.1m to 78,199 workers who were short-changed in 2017 and has since made good the debt.

Lewis, dubbed “drastic Dave” after arriving at the company in 2014 due to his extensive cost-cutting measures, has been included in the New Year’s honours list revealed on Wednesday night. 

But less than two hours after his knighthood was announced, Tesco was included in the list of 139 companies that failed to pay some of their workers minimum wage. 

The firms were investigated between 2016 and 2018 and found to have failed to pay a total of £6.7m to over 95,000 workers. Tesco accounted for the lion’s share of both figures.

The supermarket giant said it was “disappointed and surprised” to have been named as it had identified a technical issue in 2017 that meant some workers’ pay “inadvertently” fell below the national minimum wage, adding that all those affected had been reimbursed.

A spokesperson added: “We are very sorry this happened and proactively reported the issue to HMRC at the time. All our colleagues were reimbursed in full and we immediately changed our policies to prevent this happening again. In most cases the reimbursement was £10 or less.

“Once we uncovered this mistake, we took a proactive, transparent and cooperative approach with HMRC.

“We take our obligations to our colleagues very seriously and all colleagues were reimbursed in full in 2017.”

“We are therefore extremely disappointed and surprised to have been included in this list as none of the examples shared by BEIS [Department for Business, Energy and Industrial Strategy] relate to Tesco, and it was Tesco that self-reported this issue to HMRC [Her Majesty’s Revenue and Customs] in the first instance.”

Business minister Paul Scully released a scathing statement alongside the list of businesses, saying it was “never acceptable for any employer to short-change their workers”. 

He added: “Make no mistake, those who fail to follow minimum wage rules will be caught out and made to pay up.”

Lewis, who joined the retailer from consumer goods giant Unilever, was forced to announce the company had overstated its historical profits by £326m after his arrival in 2014. 

The accounting scandal led to a company fine of £129m and £85m in compensation for investors, and was soon followed by a £6.4bn loss at the supermarket giant.

But Lewis managed to turn the fortunes of the company around, dramatically slashing costs and selling off non-core parts of the retail business.

Tesco surged to a £551m pre-tax profit in the six months to September, in Lewis’ final period in charge, before Ken Murphy took over the role the following month.

After the 2019/2020 financial year Lewis was handed a £6.42m pay packet by the board, representing a more-than-30% jump in his total pay.

Tesco hit the headlines in early December after publicly stating it would hand back business rates support it received during the pandemic. The company handed back £585m in rates relief and caused a domino effect among its rivals which has seen about £2 billion repaid to the state.

But Lewis isn’t the only honouree to have links with the government list of companies failing to pay minimum wage. 

A couple who have been made made OBEs are directors of a Glasgow hairdressing business which failed to pay workers the minimum wage. 

Alan and Linda Stewart’s salon, the Rainbow Room hairdressers in the city’s Royal Exchange Square failed to pay £851.70 to six workers between 2016 and 2018.

The couple founded Rainbow Room ­International, which has 12 salons around Glasgow and the west of Scotland, and describes itself as a “formidable force in the hairdressing industry”. 

The investigation also found Clare McFarlane and Suzanne McGill, who were trading as Rainbow Room International, South Lanarkshire, failed to pay £1,304.77 to 16 workers.

Rainbow Room (East Kilbride) Limited, South Lanarkshire G74, failed to pay £2,378.77 to 15 workers

William Fleeson, trading as Rainbow Room International, Stirling, failed to pay £2,089.66 to 11 workers.

A Rainbow Room spokesperson declined to comment when asked about the business underpaying its staff.