Argos is shelling out £2.4m in wages after an HMRC investigation revealed it had underpaid more than 37,000 current and former staff.
The retailer, which was acquired by Sainsbury’s in a £1.4bn deal last September, wrote to staff after it was found to have been paying workers less than the legal minimum wage.
Argos said the shortfall in wages stemmed from asking staff to attend briefings and carry out security checks outside of their working hours.
The underpayments of around £64 per person, which date back to 2014, were first uncovered last year prior to Sainsbury’s acquisition of the business.
Sainsbury’s said it had changed processes as quickly as possible last December after being made aware of the issue and will repay the 12,000 current staff and 25,000 former staff this month.
Argos was fined £1.5m by HMRC, but it will only pay £800,000 after agreeing to pay the fine within 14 days.
Details of Argos’s underpayment of staff emerged in the same week that Debenhams was “named and shamed” by the government for short-changing 12,000 workers.
The department store business was fined £63,000 and forced to pay back almost £135,000 in wages after underpaying the employees by an average of £10 in 2015.
Debenhams blamed a “technical error” in its payroll calculations.
Argos’s underpayment is also in excess of the £1m awarded to Sports Direct staff following an HMRC probe last year.
Sainsbury’s Argos boss John Rogers, who took the helm after the grocer completed the deal last year, said in a letter to staff that he was “disappointed” by the issue, which had been uncovered by HMRC as part of a “routine visit”.
Rogers described it as an “unexpected thing” as Sainsbury’s continues to “get to grips with the business”.
He added: “Sainsbury’s prides itself on being a trusted brand where people love to work and I was therefore very disappointed to hear this, and launched an immediate investigation.”
Rogers said Sainsbury’s is planning to raise wages for Argos’s lowest-paid workers aged over 25 from £7.20 per hour to £7.66 per hour.
The pay rate will outstrip the national living wage, which is due to jump to £7.50 per hour in April.
Dave Gill, from shop workers’ union Usdaw, said: “We have been in talks with the company to get this situation resolved as a matter of urgency.
“Our members in Argos are clearly disappointed to have been underpaid and we are seeking safeguards to ensure that this cannot occur again.”