Sports Direct founder Mike Ashley admits pay errors

Sports Direct's founder Mike Ashley has admitted workers at its Derbyshire warehouse were paid below the minimum wage and its policy of fining staff for being late was unacceptable.

HMRC is investigating the firm over the minimum wage issue, Mr Ashley told MPs.

An internal investigation had discovered "some issues" with working practices at the warehouse, which he had "hopefully" addressed, he said.

The firm had "probably" outgrown his ability to run it, Mr Ashley agreed.

He said much of what he'd found out, after starting an internal investigation into how staff were treated at its Shirebrook distribution centre six months ago, was an "unpleasant surprise".

"I can accept the criticism of some of the things that you've said to me today would actually lead me to believe that it's definitely outgrown me... that's shocked me what you've said to me today," Mr Ashley said.

He was addressing MPs following a Guardian report last year that workers at the sportswear chain's warehouse had been subjected to rigorous searches and surveillance, leading to staff receiving under the minimum wage.

And a BBC investigation found ambulances were called out to Sports Direct's complex at Shirebrook, in Derbyshire, 76 times in two years.

"In the warehouse there is a culture of fear," Luke Primarolo from the Unite union told MPs at the hearing.

"People are scared because they are working under a system where they know they could lose their employment at any moment," he added.

Union officials said the Derbyshire distribution centre operated a "strike system" for misdemeanours where staff were given "a strike" for things such as spending too long in the toilet, excessive chatting or taking a day off sick.

Once an employee had six strikes they were automatically dismissed.

"When you have people under that much fear they come into work ill and that creates a significant health and safety risk," said Steve Turner, assistant general secretary of Unite.

In one case, he said an employee had given birth in a toilet at the warehouse, due to fear of losing her job if she called in sick.

He said workers had likened the conditions to a "gulag", or "labour camp" and described the conditions as "19th century working practices".

Mr Ashley defended the disciplinary system, saying it was necessary but had to be executed correctly.

His test, he told MPs, was whether you would want your son and daughter working in that system. "If the answer is no, it should be changed," he said.

It's been said Mike Ashley is often kept away from the media because of his tendency to speak openly and sometimes too frankly.

And having protested loudly about not needing to defend himself to MPs, the usually outspoken and bombastic boss of Sports Direct showed a more human side.

Before a packed public gallery, which included ex-Sports Direct workers, he admitted some of his employees may have been paid below the minimum wage last year, before security checks at the company's warehouse in Shirebrook were streamlined.

But to a certain extent, he did hold up his hands and said an internal investigation would "go on forever". He also said he would allow "impartial people" to carry out a review of the company if he was asked to.

Mike Ashley said too, in response to allegations a woman who wanted a contract was sexually propositioned by managers: "Honestly - they're repugnant, they're disgusting - what do you want me to say? Would you like it if you were me?"

So what now for Mike Ashley and Sports Direct? It seems like the boss is keen to make some changes. "You people are pushing against an open door, you're not pushing against a closed door with me. So 90 days then I'll write to you to say it's different."

One ex-employee told me he was sceptical things would really change.

Mr Ashley, said the main problem he had found was the time-consuming security checks staff had had to go through after finishing work. He admitted this had led to staff being effectively paid less than the minimum wage "at a specific time".

He insisted that this had now been addressed.

"The process is in place so that genuinely shouldn't happen. You should be finishing your shift and walk through," he told MPs.

Union officials earlier said they were in discussions with the firm and HMRC over backpay for this period, but said any agreement would only apply to warehouse staff directly employed by the retailer, which totalled 200 people.

The remaining 3,000 staff were supplied by agencies, they said.

The Newcastle United owner blamed much of the firm's problems on the firm's rapid growth, saying the internet hadn't existed for the retailer 10 years ago.

As a result, he said the firm was "too big" for him to know everything that happened, an admission that alarmed one investor.

Piers Hillier, chief investment officer at Royal London Asset Management, which has an 0.18% holding in the firm, said it suggested "significant corporate governance failings amongst the management".

"Mr Ashley frequently suggested at the hearing today that he has no oversight or knowledge of large parts of the company's business; this is extremely concerning for investors.

"It is critical that these issues are addressed and the likelihood of this being achieved will be greatly increased by strengthening independent oversight on the board."

Mr Ashley, who had only agreed to appear in front of MPs on Sunday after initially calling the committee "a joke", pledged to implement a number of changes to working practices within 90 days, including moving more staff onto permanent contracts.

"You're pushing against an open door," he told MPs.

But he was also careful to manage expectations, warning: "I'm not Father Christmas, I'm not saying I'll make the world wonderful."