Tesco faces £4bn equal pay claim but the shares rise. What’s going on?


Tesco investors seem to be remarkably sanguine about the prospect of their company facing a £4bn equal pay legal claim. 

Although the shares underperformed the wider market, which recovered strongly, and underperformed rivals Morrisons and Sainsbury’s, Tesco’s stock still finished up on the day the news broke. Quite a surprise given that number.

So what’s going on? 

The potential claim Tesco faces is similar to two already working their way through the tribunal system that were brought against Asda and Sainsbury’s. 

The issue revolves around the fact that workers in stores (most of whom are women) are paid less than workers in warehouses and distribution centres (most of whom are men), despite their work being of broadly equal value to the businesses concerned. 

Tesco hasn’t received a claim yet, so hasn’t made a public comment. But if and when it does, a lot more workers could be affected than at its rivals, and it could be worth a lot more money to them. An awful lot more. 

Leigh Day, the law firm at the centre of the potential case, has estimated that up to 200,000 workers could be due back pay of £20,000 each at Tesco, which is where the figure of £4bn comes from. By way of comparison, the Asda claim has been valued at around £100m. 

Now, this isn’t solely an issue of gender. At its core it is actually about equal pay for equal work. The men who work in shops would benefit along with their female colleagues if they win a case. 

But let’s not kid ourselves. Gender still does come into it. There’s a whiff with all these supermarkets of according a lower value to what has traditionally been seen as “women’s work”. Manning the checkouts and the like. 

They would deny this. Those fighting the existing claims have pointed to issues of recruitment and market forces. Warehouse workers earn more because they’re supposed to be harder to find. 

Analysts at HSBC raised this issue in a research note that has clearly helped to calm any nerves Tesco investors might have had. 

“We suspect that market forces are at work in pay rates. If stores and warehouses paid the same rates, we suspect that most workers would opt to work in a store over a warehouse and that if pay rates were the same there could be a shortage of warehouse workers across the industry. 

“We suspect that the retailers are confident that ultimately this claim will not go against them in the final instance, and that the £4bn mooted cost will be very wide of the mark,” it concludes.

I wondered if the writers had ever worked on the shop floor of a supermarket when I read that. I have. You have to deal with customers. You have to be polite when they’re being rude and snotty, you have to smile at their awful jokes when you feel like telling them to just get lost. You have to put up rubbish those in distribution centres don’t have to worry about while getting paid less for doing so. See where the logic behind these claims comes from?

That £4bn figure? I question whether it will ever come to quite that. Legal cases always start out with big numbers. They inevitably end up lower when the dust has settled years later, even in the event of a resounding win for the plaintiffs. But I wouldn’t be anything like as confident that Tesco doesn’t have an issue here – and potentially a big one – as HSBC’s analysts and the grocer’s big investors appear to be.