The shares of UK sports clothes and equipment retailer, Sports Direct, took a hit this week, despite reporting increased profits, following an investigation by the Guardian newspaper which it said revealed that workers at its new Shirebrook warehouse are receiving effective hourly rates of pay below the minimum wage.

The Guardian found that Sports Direct warehouse staff - who are employed by job agencies - are required to go through searches at the end of each shift, for which their time is unpaid, while they also suffer harsh deductions from their wage packets for clocking in for a shift just one minute late. These practices contribute to many staff being paid an effective rate of about £6.50 an hour against the statutory rate of £6.70.

The Guardian's report also uncovered other instances of poor treatment of the staff working at the site. Trades union, Unite, is fighting a campaign against the company's employment practices which it says include a 'six strikes and you're out policy'.  Offences which Unite claims could lead you to be sacked if you offend six times include: chatting too much; spending too much time in the toilet; being sick and unable to attend work  and being sick and needing to leave work early. Unite also says that three-quarters of Sports Direct retail staff are on zero hours pay. Unite has launched a petition to be presented to Sports Direct chief executive, Dave Forsey, asking for these employment practices to end. In September Sports Direct's AGM faced protests by Unite members calling for changes at the company.

In the company's half-year report Sports Direct Chairman, Keith Hellawell, said, "A number of issues were raised by shareholders at our AGM which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse.  Following a review the process has been streamlined which has led to a reduction in waiting time.

He added, "Our casual workers are also an integral component of our workforce. To be clear, no warehouse workers are on 'zero hour' contracts, all have contracted hours with the agencies. In retail, casual workers find the flexibility offered by these arrangements very useful. We comply fully with all applicable legal requirements and will continue to keep these under review."

In Manifest's meeting business report, produced prior to Sports Direct's AGM, we noted that it had received communication from the Trade Union Share Owners (TUSO), a group of investors representing the financial assets of the labour movement, recommending shareholders to vote against the re-election of Keith Hellawell. The TUSO claim the company has long-standing corporate governance and employment practices issues which they believe Hellawell in his capacity as chairman has failed to address. The TUSO stated that shareholders and stakeholders would benefit from an overhaul in the company’s corporate governance and believes this process should start with the appointment of a new chair.

In particular the TUSO claimed the company had failed to comply with the best practice corporate governance which poses a risk to shareholders; it provided inadequate reporting on employment issues; and that there was growing investor discontent at the Company which should be focused on Hellawell Promote brands.