Cost of living | Next & Asda payroll errors are hitting staff at the worst possible time

Next & Asda payroll errors are hitting staff at the worst possible time

Workers at two of the UK’s biggest retailers have been underpaid by hundreds of pounds over several months, forcing some to use foodbanks and skip meals just to make ends meet.

Separate payroll system glitches have hit the pay packets of Asda and Next employees, at a time when many are struggling to stretch their wages even when paid correctly.

According to the Sunday Times, Next’s issues began in February when the firm outsourced its payroll management to US tech company Oracle. The company employs around 43,000 people in the UK but it is unknown just how many have been affected by the pay errors, but some staff told the Sunday Times they had missed out on as much as £200 per month. Others claimed they had cancelled days off to bolster their wages.

Similarly, The Guardian reported that Asda bosses admitted some workers had lost out on more than £500, following almost 11,000 errors made by its external payroll provider, affecting the wages of 5,500 staff.

The GMB union said it had also had reports of some workers’ benefits being cut, due to them being overpaid one month and having the amount deducted from their next pay packet.

Nadine Houghton, GMB national officer, said: “Paying staff for the work they do is an utterly basic responsibility of employers.

“Asda knows it is a massive issue, but sadly isn’t doing enough to put this right – they refuse to invest the money needed in the payroll operation to sort this out.

Houghton added: “The stories we have heard from our members are heartbreaking.

“During a cost-of-living crisis, low-paid workers must be able to rely on a level of decency from their employer that ensures they are paid for the work they do.”

It is Houghton’s latter comments, about the extremely unfortunate timing of these IT errors, that ring most true.

Millions of UK households are in economic hardship, struggling as the rising cost of living as energy bill hikes and the cost of commodities take their toll. With inflation expected to hit 11% within months, and the cost of food expected to rise by up to 15% this year, families are facing huge increases in their monthly expenditure which will force many to turn to short-term, expensive debt to make ends meet.

A report from the UK’s Office of National Statistics (ONS) shows that 23% of adults found it either ‘difficult’ or ‘very difficult’ to pay their usual household bills in March in comparison to 2021. This had increased from 17% in November 2021.

In addition, data commissioned by StepChange from pollsters YouGov found that a quarter of people (24%) believe they are likely to get into debt as a result of the rising cost of living and 11% feel they will incur debt they are unlikely to repay.

Richard Lane from StepChange said: “The widening gap between people’s incomes and the cost of their essential spending is opening up problematic fault lines in household finances and contributing to debt problems, especially for lower income households whose budgets have little ability to flex.”

Legal expert weighs in

Daniella McGuigan, partner at employment law firm Ogletree Deakins, said: "Mistakes happen and Next won’t be the first employer to experience payroll problems; especially when implementing and rolling out a new payroll system. However, that is little comfort to the many employees who are reported to have been underpaid at a time when the cost-of-living crisis makes every penny count. Good communications and fixing the errors fast will be essential to minimise the damage to employee relations.

"The Employment Rights Act 1996 provides protection to employees. An unlawful deduction of wages claim can be made to an employment tribunal when an employee has been unpaid or underpaid wages. These claims must usually be brought within three months, beginning with the date of payment from which the deduction was made. Where there is a series of deductions, the time limit begins with the last deduction in the series. An employee can seek a declaration and claim payment (or repayment) of the sum unlawfully deducted."

Firms undeerpaying staff are also at great risk of being taken to a tribunal, McGuigan warned.

"Tribunals may also award a sum that it 'considers appropriate' to compensate for 'any financial loss sustained which is attributable to the matter complained of'", she said, adding: " This may cover, for example, bank charges or interest if the deduction causes the employee’s bank account to be overdrawn or if they incur late penalty charges as they have been unable to meet household bills and financial commitments, for example. It could, therefore, be a costly 'mistake'!

"It appears that Next has admitted the error(s). That may be the end of the matter as long as the mistakes are rectified quickly, however, if it isn’t employees will understandably run out of patience."

Reconsidering monthly payroll

StepChange also recommend HR departments should reconsider their payroll management - a timely suggestion, given the system glitches at Asda and Next.

Lane says the benefits of monthly payroll are heavily if not entirely skewed in favour of employers rather than employees - more predictable cashflow, reduced administrative costs and compatibility with various digital payment schemes, for example. Yet, the monthly payroll has become the standard model, accepted by all.

Even when payroll systems run smoothly, the cost-of-living crisis should prompt greater questioning of the standard model and lead employers to consider dropping the concept of a monthly paycheque, Lane says. Instead, they could adopt a more flexible payment policy that allows employees greater access to their wages and supporting financial data.

These wages could be paid on either a daily, monthly or weekly basis based on employees’ demands. Furthermore, employees should be given real-time wage updates helping them to manage their monthly budgets.

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This has the potential to reinvent remuneration, transforming how time and pay are tracked, viewed and verified.

It would improve financial wellbeing by giving greater control over cashflow and allowing for more efficient budgeting. It would also reduce the dependency on loans and credit and lessen the chance of going into long-term debt.

There are also benefits for employers, such as enhanced employee wellbeing, improved productivity, reduced absenteeism and the potential to attract and retain talent in an increasingly competitive marketplace.

If employers really want to support their employees though this crisis, it’s time they break the feast and famine cycle of monthly pay and provide their employees with free, flexible access to their salary.

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