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Tesco's Equal Pay Bill Won't Be Four Billion Pounds: Gadfly

By Publications Checkout
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Tesco's Equal Pay Bill Won't Be Four Billion Pounds: Gadfly

Tesco CEO Dave Lewis has got 99 problems, but shelling out £4 billion shouldn't be one of them.

The shares fell as much as 2.4% after law firm Leigh Day said it was bringing an equal-pay case on behalf of the company's female staff, where the total payout could reach that lofty amount. In a rising market, it looks like investors taking fright.

But really, they're looking through the headlines. The price recovered somewhat and is now just 0.5% down from yesterday, so the total loss from the move is about £150 million.

There are good reasons why investors should stay calm.

The £4 billion figure floated by Leigh Day is a notional one. It is based on a £3 difference between the earnings of female workers in Tesco stores and men employed in its distribution centres.

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The total shortfall could reach 20,000 pounds per worker, the firm claims. With potentially 200,000 workers affected, that amounts to a claim of £4 billion.

So there are many steps to go before any kind of pay out is ever reached. And if it were, there is no certainty it would ever get anywhere near that number.

The claim has been submitted to ACAS, the arbitration service and the first stage of the employment tribunal process. That's a much lower level than the high court, so there's a very long road to travel yet.

Job Shifts

Similar cases were brought in 2014 against Asda, and in 2015 against Sainsbury's. They are still working their way through the legal system.

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And Tesco, along with other retailers, has already demonstrated their ability to cope with shifts in pay structures. They have already faced pressure on their costs to comply new Living Wage rules.

With the consumer backdrop challenged, and more sales moving online, where costs are higher, they have had to make changes elsewhere, for example by removing some of the premiums paid for Sunday shifts.

Tesco, Sainsbury's and Morrisons, have all recently announced thousands of job cuts, underlining the pressure on wage bills.

This all suggests that they have some strategies to deal with whatever costs ultimately arise from the issues raised by Leigh Day.

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Tesco investors should be far more concerned about the success of the integration of Booker, whether there'll be harmony or tension between Lewis and Booker CEO Charles Wilson, and the continued march of the German discounters.

This last issue is an important one, as they're not running out of steam as much as some executives and analysts would like to think they are.

Worries that Tesco will have to shell out £4 billion to settle an equal pay claim should be firmly relegated to the back shelf.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine. 

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