Frasers Group minimum wage scandal: What now?

One of Frasers Group’s warehouses was found to be underpaying staff. As the investigation into the allegation continues, Retail Gazette speaks to experts to find out what's in store for the retail giant.

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Frasers Group Sports Direct House of Fraser Mike Ashley
Warehouse workers at Sports Direct parent company Frasers Group were allegedly paid below the National Minimum Wage, according to a recent Guardian expose.

The reputation of retail giant Frasers Group has once again attracted the wrong kind of media attention. After months of withholding rents from landlords, keeping stores open during the peak of Covid-19, and falling into a Belgian tax dispute, it was recently accused of underpaying warehouse workers.

A Guardian reporter went undercover to one of Frasers Group’s warehouses in late June and early July, and the resulting news article had allegations that staff were allegedly underpaid at £8.20 an hour. The legal minimum is £8.72 per hour. Warehouse staff supplying the group’s Sports Direct, Flannels, Jack Wills and USC fascias were also allegedly not paid for half-hour breaks.

The investigation came four years after the last time Frasers Group – then known as Sports Direct – was found to be breaching minimum wage requirements, which resulted in workers receiving about £1 million in back pay. However, Frasers Group denied the recent allegations and said the Guardian investigation was founded on “a false premise”.

While everything is still under investigation, Rob Coleridge, senior associate at law firm Irwin Mitchell, said that if these allegations were proven true, it could be damaging to Frasers Group, whose share price has been steadily falling over the last month.

Frasers Group Sports Direct House of Fraser Mike Ashley
Mike Ashley is the billionaire founder & majority owner of Frasers Group.

“Businesses cannot get away with paying staff below the minimum wage. It is quite simply illegal and they will not only be forced to pay financially, their brand and reputation can often be irrevocably damaged,” Coleridge told Retail Gazette.

News of retailers breaching basic laws in their supply chain has become a bit of theme in recent weeks. A prime example is Boohoo Group losing £1 billion last month after a Sunday Times investigation included allegations of modern slavery after the third party supplier that runs its Leicester warehouse was accused of paying its workers just £3.50 an hour.

Boohoo had previously come under fire for allegedly risking the spread of Covid-19 in Leicester amid allegations that its suppliers told staff to come into work in the factory during lockdown despite being sick.

“There clearly isn’t enough being done to stop the mistreatment of workers,” argued Andy Barr, co-founder of online price tracking site Alertr.

“These breaches have slipped under the radar for so long as demand for fast fashion continue to rise but as more retailers are scrutinised, hopefully we will see more held accountable for their wrongdoings and mistreatment of staff which will allow for tighter regulations to be put in place.”

Frasers Group Sports Direct House of Fraser Mike Ashley
Frasers Group bought House of Fraser out of administration in 2019 for £90m.

Mavis Amankwah, managing director of PR firm Rich Visions Small Business, said the allegations against Boohoo and Frasers Group is what sparked the public’s interest all over social media with the hashtag #GoTransparent.

“This is a clear demonstration that it’s impossible for the customer base to turn a blind eye to such behaviours and that each company should be cautious of their approach, while preventing the minimum wage law breach,” she told Retail Gazette.

“This situation and the public’s advent on social media will definitely scar the image of the company and their values as a whole.”

Frasers Group may be forced to take further action, or endure punitive measures, if the allegations prove to be true. But Rick Smith, managing director of business consultancy Forbes Burton, argued that “any punitive measures could do much more damage to the high street than good”.

“Given their reactions in the past, Frasers Group will simply carry on as before”

“Given their reactions in the past, Frasers Group will simply carry on as before,” he said.

“Their customer base may well be outraged, but as the shops are convenient and a well-known brand, it is unlikely anyone will boycott the stores outright.

“The scandal only affects the Fraser Group’s reputation as much as other incidents in their long history of controversy have. In the long term, this might not be a very significant event.

“For most other companies, the group’s reputation may well be seen as being on the brink, but the group has weathered similar and some would say, worse storms before and although they haven’t always come out of these situations in the best light, it doesn’t seem to have damaged their brand too much.

“Other retailers should be very cautious of this approach, Frasers Group is headed up by a very experienced businessman who is well versed in pushing the limits as far as possible and is used to dealing with any negative fallout.”

Frasers Group’s loyal customer base may try to sweep this under the rug and the appetite for fast fashion could well cause many consumers to turn a blind eye. Despite these possibilities, the awareness surrounding ethical issues and working conditions is far greater now than it was four years ago.

Nevertheless, given its rebranding is less than a year old, many customers are unlikely to be aware of the full range of brands and retailers that Mike Ashley is associated with. As such, they may well continue shopping at the group’s high street chains, regardless of the allegations of major employment law breaches.

If the allegations turn out to be true, Frasers Group should make sure it takes full responsibility, apologise, make tangible changes to improve working conditions, and ensure back pay is arranged. To stand a chance of recovering from this scandal, Frasers Group may also need to consider regularly reviewing its working practices, contracts and payments to employees and suppliers.

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3 COMMENTS

  1. Let’s get the facts before jumping to conclusions. While they under paid staff on a technicality before so did all other retailers as staff searches always took place after staff had clocked off

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