Britain’s biggest independent co-op has made the highest single payout to a worker for breaching low pay laws and is examining whether 200 others may have been paid below the minimum wage, the Guardian can reveal.
Midcounties Co-op, which turned over £1.2bn last year, underpaid a newspaper delivery man for four years by more than £14,000 and has also paid more than £4,000 in missing wages and expenses to another delivery worker, who claimed he earned as little as 69p per hour on some days.
The payouts come after HM Revenue and Customs (HMRC) pursued the complaints of two newspaper deliverymen about what they were being paid by the UK’s largest independent co-op, which trumpets its desire to create “a better, fairer world”.
Midcounties Co-op said it is now considering whether it needs to make further back-payments to up to 200 other newspaper delivery workers aged over 16 who may also have been paid illegally low wages. It is asking workers who used to deliver papers and magazines from its network of 234 stores to come forward as they may also have been underpaid.
Rodney Sharpe, 64, who has diabetes and who delivered newspapers in Maidenhead, Berkshire, with the help of a walking stick, was paid well below the minimum wage for at least four years, Midcounties has admitted. Sharpe estimated he earned as little as £3.15 an hour when the mandatory “national living wage” currently stands at £7.20 per hour. “It was unfair I was being underpaid for that amount of time,” said Sharpe, who is well-known locally as a reliable worker who has rarely taken a day off.
Ben Reid, the chief executive of Midcounties Co-op, which made £21m in operating profit last year, said: “We would like to apologise to any past or present colleagues affected.”
A spokesperson for the Department for Business, Energy and Industrial Strategy, which oversees the minimum wage, said: “We are clear that when employers do not comply with the law, they will be found out and punished, and we would encourage any worker who’s concerned to contact Acas. Every complaint received is fully investigated by HMRC.”
The payouts come amid growing concern at Westminster at the number of workers on piecework rates in the UK’s growing “gig economy” who may be receiving illegally low wages. Between 2008 and 2015, the number of over-65s in self-employment has doubled, and almost half of these jobs are considered low paid.
HMRC is considering a series of complaints from self-employed couriers for Hermes, the parcel delivery company, that they should be classed as workers and so paid at least the minimum wage. Taxi drivers for Uber are also awaiting an employment tribunal verdict next month to find out if they should also be paid above the wage floor.
Midcounties Co-op employs 9,000 people and runs food stores, pharmacies, funeral parlours and travel agents across central England from Shropshire to Berkshire. It has a trading relationship with the Co-op Group, but is independent.
Sharpe said he had been initially reluctant to complain. He said: “I never made a fuss because I was worried they might say: ‘If you don’t like it, leave.’ I think a lot of people are reluctant to battle because employers will say that. I needed the job to pay my bills.”
After an internal review overseen by an HMRC low pay inspector, the co-op has admitted that it failed to take into account how much Sharpe’s disability slowed down his round.
Roger Lilley, 66, another newspaper delivery worker for Midcounties Co-op, sparked an HMRC inquiry with a separate complaint that he took home as little as 69p an hour on some days for delivering papers. Midcounties has now paid him more than £4,000 in missing wages and expenses, bringing to more than £18,000 the payouts to the two workers. But that appears likely to be the tip of the iceberg.
Reid said: “We are calculating back pay that current colleagues may be entitled to and have placed notices in all of our stores asking for people employed at any time over the last four years to come forward so we can assess any historical payments that they may be due for their deliveries.”
Two hundred of the 500 newspaper delivery workers it employs are aged over 16.
The breaches shocked some of the co-op’s customers, who said the illegally low pay was at odds with the organisation’s ethical image. MidCounties Co-op joins a short but growing list of employers including H&M, Welcome Break and French Connection which have been exposed for breaking the minimum pay law.
“I think it is disgusting, considering he was going through what he was with his walking stick and the pain,” said Coral Simpson, 69, a Maidenhead resident to whom Sharpe delivered seven days a week. “He’d show up in the snow as well and I don’t know how he managed that.”
An HMRC inquiry into Lilley’s case ruled that he was paid below the minimum wage for five of the six months it assessed from 2015. He was working seven days a week, which the co-op has also admitted was in breach of working time regulations, and rarely took leave.
In 2014, he complained in writing to the co-op that after deducting petrol and other car expenses he was earning the equivalent of 69p an hour Monday to Friday for his round delivering 46 papers on a piecework rate of a little over 18p per delivery.
“I have not been treated reasonably or fairly,” he wrote in a letter seen by the Guardian. “I accept that no one from management would knowingly try to employ an adult on 69p an hour and that this is a legacy issue related to pay and conditions more appropriate for schoolchildren doing short local paper rounds before school … The value of the Co-op’s brand is that it trades ethically. I hope that it will be seen that meeting my request is small beer when compared with protecting the value of the brand.”
Midcounties Co-op initially denied failing to pay the minimum wage and said the round should on average have taken Lilley less than 90 minutes. He said that including waiting time it took about two hours 20 minutes. It did not account for his £57-a-week spending on petrol, insurance and road tax car expenses and said Lilley should walk half of his rounds. Lilley said that was “laughable” since the papers weighed up to 68kg and there was no way he would complete his deliveries by the 7.30am target without using his car.
The co-op has agreed to pay him £1,935 in backdated car expenses and £1,853 to cover wages on days he worked but were marked as holiday. HMRC assessed six months of his work and ordered the Co-op to pay him £144 to compensate for five months when he was paid below the minimum wage. It estimated that the average time for his round was one hour 44 minutes.
Reid said: “The issue that Mr Sharpe and Mr Lilley raised with us was as a result of the way we previously structured this function of our retail operation and pre-dates our move to central payroll and hourly rates for delivery colleagues.”
The co-op branch on Bath Road, Maidenhead, has closed and the rounds have been transferred to another newsagent, who is paying Lilley £11 an hour plus car expenses.
“I am servicing the same customers, doing the same job, and my employer is making money,” Lilley said. “It seems to me the co-op speaks about its values of democracy, openness, equality and social responsibility and it has trashed the lot. The co-op made it so very difficult for us. They should have come clean at the start instead of which we were made to battle hard over three years, just to be paid the minimum wage.”
Reid said: “We are grateful to Mr Sharpe and Mr Lilley for bringing this matter to our attention. After their case was escalated to our senior management team we thoroughly reviewed the employment and remuneration structure for newspaper delivery. All of our delivery colleagues were registered on our central payroll in 2015 and have been receiving hourly pay since January this year.”
The larger Co-op Group, which has a trading relationship with Midcounties but runs its own stores, said that last year it awarded a 8.5% pay increase to branch staff, which means that anyone working in its stores has an hourly wage of at least £7.28.
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