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Top retailer admits paying staff less than minimum wage

Photographer | Collection | Getty Images

U.K. retail tycoon Mike Ashley has admitted to British politicians that workers at his company's warehouse are paid less than the country's minimum wage.

The founder of sportswear chain Sports Direct and owner of Newcastle City soccer team, sat down in front of the U.K. Parliament's Business, Innovation and Skills (BIS) Committee to answer allegations that lengthy and unpaid security searches of staff had pushed earnings below a legal level.

Ashley had initially refused to appear before the committee, but reversed his decision, stating in a letter to Iain Wright, chair of the business select committee that he "had nothing to hide".

An undercover report by The Guardian in December claimed workers each day had to roll up their trouser legs and show the top of their underwear to prove they weren't stealing.

When quizzed today, Ashley admitted that due to lengthy security searches staffs were in effect receiving less than minimum wage.

"On that specific point, for that specific day, yes", he told the committee.

When asked if staff were now getting paid for the searches, Ashley said no but that staff were no longer being held up at the end of the day.

Ashley said he believed workers were no longer being fined for being a minute late, but he was 'terrified' that he may have got claim wrong.

Haranguing staff

One aspect under investigation by the committee is whether the company's Tannoy system was used to harangue employees. Ashley told lawmakers that he would accept punishment for any misuse.

"If we are abusing it, then Sports Direct deserves the cane, like any other company deserves the cane."

According to Sports Direct's 2015 annual report, group revenue was up 4.7 percent year on year to £2.8 billion ($4 billion) with pre-tax profit up 30.9 percent to £313 million. The company has 661 stores worldwide and a staff turnover rate of about 19 percent.

The billionaire took many opportunities to stress the size of the Sports Direct and how difficult it has been to keep an eye on all aspects of the business as it grew.

"One minute I had a tiny little inflatable and you're in control and the next minute you are on an oil tanker".

Earlier in the hearing, Ashley's company was also accused of putting people's health at risk by employing a "six strikes and you're sacked" rule.

Regional Unite officer Union Luke Primarolo said people were issued with "strikes" if they reported in sick and were therefore coming in to work when they should be at home.

Primarolo said Unite found there increased health and pregnancy problems, including one worker who had to give birth in the Sports Direct toilets.

Zero hours contracts

'Zero-hours' contracts have caused concern in the United Kingdom as there is no obligation for employers to offer work on a regular basis.

And Steven Turner, assistant general secretary of the Unite Union say the business model of Sports Direct relied heavily on zero hour and short term contracts.

"Some 79 percent of all Sports Direct store employees are employed on zero hours contracts. This is a business model that has exploitation at the very heart of it," he said.

Turner said Sports Direct's business model is one typical of the retail and hospitality industries but is now creeping in to other sectors such as transport and manufacturing.

On Unite union concerns about the company's practices, Ashley said he could do better job for workers than unions.