John Lewis is to make a one-off payment totalling £40m after the department store discovered that it had not paid staff holiday pay correctly over the past seven years.

Around 69,000 staff will receive the payment this month, with more than half receiving under £120.

John Lewis said that following a recent review of its holiday pay policy it discovered that staff who had received premiums for working on a Sunday or bank holidays had been paid incorrectly under the Working Time Regulations legislation.

The retailer said the cost to the department store group would be around £40m. This one-off cost will be reported in its half-year results in September.

John Lewis, which has updated its pay systems to ensure all future holiday payments are correct, said it expects future pensions liabilities to rise by about £7m as a result.

The change is expected to add around 0.5% to its annual pay costs.

John Lewis personnel director Tracey Killen 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.”