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Next's underpayment of staff risks tribunal action

High street retailer Next has apologised to staff after a payroll error left workers underpaid for five months.

Next introduced a new payroll system from US technology firm Oracle in February 2022, but a series of issues have meant staff were short changed by up to £200 a month since.

The retailer declined to say how many employees were affected.

Errors have also affected employee pensions, as pension contributions were deducted from payslips and not invested in pension funds. 

Next promised to reimburse workers fully for this loss.

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Daniella McGuigan, partner at employment law firm Ogletree Deakins, said employees will have the right to take Next to a tribunal for their unpaid wages.

Speaking to HR magazine, she said: "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.

"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'. It could, therefore, be a costly mistake."

The underpayments have coincided with a severe cost of living crisis in the UK, which included rising food and energy prices and a record high inflation rate. Some staff have had to resort to giving back holiday days and using food banks to make ends meet during while they have been underpaid.

A Next spokesman said: "This is one of the very few instances where Next has outsourced critical software and we have learnt some important lessons about integrating our in-house applications with third-party platforms.

"We are acutely aware of the problems these payroll errors have caused some of our colleagues. We sincerely apologise to all those affected and assure them that we are resolving these problems as a priority.”

McGuigan added: "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."