Vodafone incentivised security staff to fine its own franchisees

Vodafone incentivised its security staff to increase “clawbacks” levied on its own franchisees, as part of a programme that led to the telecoms group fining its own shopkeepers millions of pounds for seemingly small administrative errors.

The policy – which included one alleged case of a £10,000 penalty for a franchisee whose mistake cost Vodafone £7.08 – involved setting “key performance indicators” (KPIs) for the telecoms group’s internal employees to collect total annual fines of £1.5m from the small business people running the FTSE 100 company’s high street stores.

The existence of the fines regime has proved controversial for years and forms part of a high court claim brought by 62 former Vodafone franchisees in 2024, who allege the mobile phone company “unjustly enriched” itself by up to £85m by using tactics MPs have compared to the Post Office Horizon IT scandal.

The court filings include an allegation that Vodafone attempted “to increase its revenue” as “senior staff members were tasked with and incentivised to implement” fines, as part of a policy that the group has since tacitly admitted was flawed.

In 2024, Vodafone told the Guardian: “We have made a number of changes to our formal processes and governance and made a series of goodwill payments to numerous franchisees. For example, we made the decision to reimburse £4.9m including VAT [£4m] across our franchise estate (this included retrospective reimbursement of fines and clawbacks).”

However, the Guardian has seen fresh details suggesting the company had specifically encouraged its own staff to increase the fines they were collecting from franchisees – while also ring-fencing the proceeds to reduce the cost of running the company’s security department.

While the company did not deny it had set its employees targets to increase penalties on its own partners, it stressed individuals were not “financially” incentivised to hit these goals.

The cost to Vodafone of investigating each individual case is understood to have been £33.20, according to former Vodafone staff members claiming knowledge of the programme, which is considerably below the £350 minimum fine given to a franchisee for a first infringement.

Figures contained within an internal Vodafone document, dubbed the “consequence matrix”, go on to detail how those charges quickly ramped up: a second violation within a three-month period resulted in the forfeiture of 15% of a franchisee’s monthly commissions, rising to 30% for a third complaint.