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John Lewis staff to receive £40 million after holiday pay mistake

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John Lewis staff will be sharing a £40 million pay top-up after the company realised it has been miscalculating holiday pay for at least seven years.

About 69,000 John Lewis and Waitrose staff will receive one-off payments this month. More than half of the recipients will receive under £120, but others will receive over £1,000.

The retailer had been basing its holiday pay on the contracted weekly hours for staff, but staff working on Sundays and bank holidays are paid premium. And under the Working Time Regulations legislation, this should have been reflected in the holiday payments.  

John Lewis said it also expects to increase future pensions liabilities by about £7 million due to the mistake.

The partnership’s pay systems have now been updated to ensure all future holiday payments are correct. This change is expected to add about 0.5% to annual pay costs.

Tracey Killen, John Lewis’s director of personnel, said: “As soon as we established that we were not implementing the Working Time Regulations correctly, we worked quickly to make the repayments to our partners in a way that is both fair and responsible.”

Need for simplification

Paula Whelan, an employment law partner at Shakespeare’s, said this case highlights the need for simplification around the Working Time Regulations legislation.

“Calculating holiday pay is already a difficult process, which has become more complicated in the last couple of years because case law is no longer consistent with the literal wording of the regulations,” she said.