Sports Direct pledges £10m towards staff pay rise

Sports Direct has bowed to criticism of its working conditions by pledging £10m towards a staff pay rise, but Britain’s largest trade union dismissed the response to Guardian revelations over controversial employment practices at the retailer as a “PR stunt”.

Unite said the 15p per hour pay increase was pitiful and should not distract from “Victorian work practices” in Sports Direct warehouses.

Ian Wright, the head of the influential business, innovation and skills select committee in Westminster, demanded confirmation that the pay rise would apply throughout the business. The committee is seeking to question Sports Direct founder Mike Ashley about his company’s behaviour.

The Sports Direct announcement, which was accompanied by a commitment to turn the company into Britain’s best high street employer after John Lewis, followed a Guardian investigation that revealed how the company effectively pays thousands of temporary workers below the national minimum wage of £6.70 an hour. Warehouse staff undergo searches at the end of each shift for which their time is unpaid and suffer deductions from their wage packets for clocking in for a shift just one minute late.

Despite Unite’s criticism of the pay rise pledge, it will be viewed by many as a climbdown for Sports Direct and its founder after the Guardian revelations were met with initial hostility by the company. The announcement comes just two weeks after the company issued a lengthy defence of its employment practices and hit out at “unfounded criticisms”.

The increase will affect an estimated 15,000 workers on zero-hours contracts in stores and 4,000 agency staff at Sports Direct’s depot in Shirebrook, Derbyshire. It will take effect from 1 January and will cost £10m a year, including “related costs and knock-on costs”, the company told the stock market in a statement.

A spokesman for Sports Direct said the extra costs included national insurance contributions and the wage rise was not a payment in arrears for any salary shortfall in the past.

The company insisted it was compliant with minimum wage regulations, but refused to disclose whether it had been approached by HMRC over the Guardian’s findings. Two undercover Guardian reporters were paid £6.50 per hour on average for their shifts in November after the compulsory searches and a penalty for clocking in five minutes late were taken into account.

The pay rise means staff aged over 21 will get an increase from £6.70 per hour to £6.85, while those aged between 18 and 20 will collect £5.45 per hour instead of £5.30. The 15p premium will also take effect for over-25s when the national living wage of £7.20 is introduced in April, meaning they will be paid £7.35.

Announcing the £10m investment in a newspaper interview, Ashley said he wanted to make Sports Direct “the best high street retail employer after John Lewis”.

The tycoon told the Daily Mirror: “I realise this is ambitious and it won’t be easy, but I believe that as a FTSE 100 or even 250 company, we have a responsibility to set a high moral standard.”

Ashley said Sports Direct paid out “life-changing bonuses” to several thousand staff every year but that the company had an “obligation to our whole workforce”. The tycoon told the newspaper that he wanted them to “hold my feet to the fire and ensure we don’t slip up”.

However, Unite demanded further commitments from Ashley. It called for the company to commit to paying the living wage – a voluntary measure separate from Osborne’s national living wage and set at £8.25 outside London – and put all staff on permanent contracts instead of zero-hours agreements, under which staff do not know how many hours they will work from one week to the next.

Luke Primarolo, a Unite regional officer, said: “This pitiful promise by Sports Direct to pay just over the minimum wage should not distract from the Victorian work practices at the retailer’s massive Shirebrook depot. Nor should it deter HMRC from investigating the possible non-payment of the minimum wage to the thousands of agency staff who eke out a living on the site.

“Fundamental problems remain at Sports Direct, ranging from the exploitative use of zero-hours contracts in its stores through to ‘gulag’ working conditions at its main warehouse in Shirebrook.

“If Mike Ashley is to fulfill his promise of making Sports Direct a model employer then he needs to commit Sports Direct to becoming a living wage employer and stamp out abusive work practices by putting all staff on permanent contracts. Otherwise, he risks accusations of engaging in yet another PR stunt and a continued loss of confidence among customers and investors alike.”

Sports Direct has already said Ashley will lead a review into the terms and conditions of the company’s agency workers in 2016. Unite said Ashley needed to engage with the union “as a matter of urgency” over the review.

Wright said he still wanted Ashley to appear in front of the select committee and that the devil may be in the detail about the minimum wage announcement. The Labour MP said: “The news that Sports Direct is committing to paying its staff above the minimum wage is a welcome development. However, the committee’s wish for Mr Ashley to come before us and give evidence in the New Year still stands.

“We would like to hear further details as to how Sports Direct will guarantee that this commitment is applied throughout the company. We would also like to hear directly from Mr Ashley regarding an inquiry we will consider into employee rights, working conditions and the future of work, particularly amongst the low-paid, in an era of growing self-employment and agency work.”

Shares in the retailer rose slightly after the announcement, increasing by 7.50, or 1.3%, to 577p, valuing the company at £3.4bn.

More than £400m was wiped off its value in early December after investors turned on the company following disappointing financial results and the Guardian revelations.

The investigation prompted Chuka Umunna, the Labour MP, to label Sports Direct a “bad advert for British business”.

In the wake of the revelations, Nick Boles, the business minister, said HMRC could take enforcement action if staff had been paid less than the minimum wage. Workers have until 31 January 2016 to tell HMRC if they have not received the minimum wage.

Sports Direct insisted it was compliant with employment regulations in a statement defending its practices on 18 December. However, it said the review of terms and conditions for agency workers could lead to the company making changes.