Staffline shares slump following six-year minimum wage underpayment

Staffline, one of the biggest recruitment and training agencies in the UK, has seen its shares tumble after PwC delayed its annual accounts amid whistleblower allegations that it had broken national minimum wage rules for six years.

Staffline Group shares were trading this afternoon at £1.09, down from £12.15 at the start of the year, after the agency announced it was setting aside £15.1 million to cover the cost of the underpayment of workers, almost double the sum it had previously allocated. Its shares were suspended for six weeks earlier this year.

The Nottingham-based firm, which includes the training provider PeoplePlus, operates in the food production, logistics, manufacturing and automotive sectors, providing work for “more than 50,000 people every day” across 350 sites in the UK and Ireland. Customers include Tesco, Sainsbury’s, Boohoo and Marks & Spencer.

The minimum wage underpayment relates to the company not including the time taken for workers in food production facilities to change into and out of their workwear.

In March, an independent investigation led Staffline to put aside £7.9 million to cover historical underpayments between 2013 and 2018. Following discussions with HMRC, the group has now increased that provision.

“As a result of completing this further review, the board has made a final update to the provision for liabilities associated with historical national minimum wage compliance, increasing this from £7.9 million to £15.1 million,” the employment outsourcer stated.

Staffline said its procedures had now been rectified. Additional time paid to workers for changing into work clothes is now charged to the client, but costs relating to historical minimum wage non-compliance are not recoverable from customers.

“The nature, complexity and volume of data that has been analysed as part of the additional independent specialist review, and the subsequent audit of this information has been a very significant undertaking which took several months to complete.  Furthermore, the calculation of underpayments is a difficult and complex matter requiring judgement and the application of assumptions, all of which have been subject to discussions with HMRC,” Staffline stated.

Chris Pullen, chief executive of Staffline, said: “Whilst the time taken to announce our 2018 financial results is frustrating, we look forward to posting these results at the end of June at which point we expect the business to return to normalised trading.

“Staffline continues to enjoy a unique position in its markets and once this episode is behind us we are confident of a return to future growth.”