Greencore accused of exploiting UK staff in row over wages

Chief executive Patrick Coveney gets 160 times more than lowest-paid

Patrick Coveney chief executive of Greencore: ‘We’re operating in an industry where retail prices for products are falling and we have to be very competitive on all the components that go into our costs.’ Photograph: Brenda Fitzsimons/Irish Times

Patrick Coveney chief executive of Greencore: ‘We’re operating in an industry where retail prices for products are falling and we have to be very competitive on all the components that go into our costs.’ Photograph: Brenda Fitzsimons/Irish Times

 

Greencore likes to tout itself as one of the great Irish success stories. Forged from the ashes of the loss-making Irish Sugar company, it has risen to become the world’s largest manufacturer of pre-packed sandwiches.

In the UK, where most of its €1.6 billion sales are generated, it boasts a client list that includes Marks & Spencer, Waitrose, Sainsbury’s and Tesco. It’s highly likely that when you’re munching on a sandwich, a wrap or a salad from one of these retailers, it’s a Greencore product.

More recently, the company has set its sights on North America, where it has already won contracts to supply the Starbucks and 7-Eleven chains.

However, its reputation for stellar growth has been marred by allegations in relation to staff pay and conditions.

Last month, it sparked a major row in Britain by going directly to Hungary to hire low-cost workers for its plant in Northampton, where it employs 1,100 and has plans for a new £30 million (€38 million) facility.

The Daily Mail ran the story under the headline, “Is there no one left in Britain who can make a sandwich?”

The controversy appeared to touch a raw nerve in Britain, where an increasingly fractious debate about immigration has polarised opinion. Even prime minister David Cameron weighed into the row, insisting the Irish company’s decision to recruit abroad reflected the need for “proper immigration controls” and “welfare reform”.

The company initially said it had been forced to import foreign workers because of the renewed strength of the economy but later claimed it had tried to recruit locally without success, even though there are more than 8,000 unemployed in the town.

Union sources, however, claim Greencore was forced to go abroad because it pays its staff low wages to work long hours – often in refrigerated conditions, an accusation the company strenuously denies.

Regardless, a significant portion of its new recruits in Northampton are expected to be hired on the minimum wage – currently £6.50 an hour in Britain – in line with its other operations in the UK, which is about twice the average salary in Hungary.

The UK’s Living Wage Foundation estimates the hourly rate needed to cover the basic costs of living in Britain, outside of London, is £7.85 an hour – 22 per cent higher than the compulsory minimum of £6.50.

Employment practices

The Irish TimesPatrick CoveneySimon Coveney

“We’re operating in an industry where retail prices for products are falling and we have to be very competitive on all the components that go into our costs,” Mr Coveney said.

“We pay at least as much as our competitors and in many cases more, and we have better levels of retention, better levels of engagement and more training programmes and benefits for workers than our rivals.”

As chief executive, Mr Coveney gets total remuneration of £2 million (€2.5 million), according to recent filings with the London Stock Exchange – a figure 160 times that of the earnings of those on the bottom rung of the company’s pay ladder.

Mr Coveney said his remuneration was set by the Greencore board in consultation with shareholders, “who voted on it”.

“I accept I’m very well-paid but the vast majority of my pay is performance-related . . . related to the financial performance of the business and the strategic development of the business, and most of it is correlated to what happens to our share price,” he said.

In a statement, Greencore said: “The majority of our employees are not on the national minimum wage. In the case of Northampton, this figure is less than 10 per cent, which is broadly representative of the rest of the group.”

Three-month trial

Workers in the Northampton plant complain the low wages do not take into account the long hours they have to work, often overnight and in refrigerated rooms, to facilitate the company’s early-morning deliveries. A number of agency staff also say they are forced to turn up at 5.40am only to undergo a random selection process which may or may not guarantee them a day’s work.

While the company acknowledges it uses agency labour to enable it to manage production peaks and to give it greater flexibility, it denies it engages any staff on “zero hour” contracts.

Union sources claim the company is exploiting the “Swedish derogation” clause, a loophole that allows firms to get around the agency work regulations, which insist agency staff must be on comparable terms with their directly employed equivalents. Essentially, companies can claim they don’t employ “zero hour” staff because the workers are employed by the agency, not the company.

Mr Coveney admits agency staff – many working on basic rates of pay – accounted for up to 30 per cent of the workforce at times during the year, but insists these workers are not employed directly by the company.

In a recent corporate social responsibility report, Greencore said its chief aim was to operate in a “sustainable and responsible manner” based on four principles, one of which was placing “people at the core”.

Exploiting workers

In the company’s Hull factory, which makes cakes and desserts, trade union Unite recently put in a pay claim to lift minimum wage workers up to estimated “living wage” rates – a claim the company has rejected on affordability grounds. Insisting minimum wage staff had already benefited from a recent rise in the legal minimum wage, Greencore instead offered all staff above the minimum wage a 2 per cent pay rise. It would have given the average worker between 16p and 20p extra an hour but was rejected by staff.

A union source describes the mood among the 700 Greencore workers in Hull as “extremely despondent”.

Curbed overtime

Last year, the company’s reputation also took a knock after a test showed traces of horse meat in one of the ready meals it was supplying to UK supermarket chain Asda. However, the finding does not appear to have dented performance as illustrated in the company’s latest set of financial results, which report a 11.4 per cent rise in group operating profit to £82.9 million (€106 million) for the 12 months to the end of September.

On the strength of these numbers, Mr Coveney has reiterated his ambition to create a billion-dollar company in the US, where Greencore is on a major expansion drive.

Ironically, the company’s transition from sugar producer to convenience food giant was aided by a controversial €127 million compensation deal from Brussels in 2006 on foot of the closure of the sugar beet industry here.

Certainly the company and Mr Coveney have capitalised on that successful transition. Greencore’s share price has rocketed since Mr Coveney switched its main listing from Dublin to London almost two years ago, rising from 52.5p sterling to £2.90 at the end of last week, giving shareholders a more than fivefold return on their investment in that time.

Marks & Spencer, which looks set to be the main client of Greencore’s new Northampton facility and which prides itself on having a strong corporate social responsibility ethos, said: “All our suppliers must adhere to our strict ethical standards as a condition of doing business with us.”

Labour candidate for Northampton South Kevin McKeever said his party wanted to see the minimum wage brought up to £8 an hour over the lifetime of the next parliament, on the grounds that low-paid jobs were being subsidised by taxpayers via tax credits. He said the Greencore controversy played into a wider national debate about immigration and the expectations of western workers.

Low-cost economies

The company said it “strongly encourages diversity at work – by nationality, gender, age and educational background – and recruits on a strict equal opportunities basis”.

Regarding the Northampton row, Mr Coveney said: “What should have been, and actually is in substance, a very positive news story about Greencore significantly expanding its business in Northampton, with up 300 new jobs and a huge spending increase in the area, turned into media storm about immigration and the living wage.”

That said, the rumblings over the Greencore’s employment culture, as evidenced by the Northampton row, appears to undercut company’s preferred image of itself.

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