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Should retailers increase employee wages to retain their employees?

Raising wages could arguably cause backlash for retailers as it leads to rising costs for the business

Retail staff’s demands for higher wages, especially shop floor staff, are in the media on a pretty regular basis. At the same time, it’s widely known that raising wages could arguably cause backlash for retailers in that it leads to rising costs for the business.

Just last month, book retailer Waterstones revealed it couldn’t raise its employees’ wages because, as managing director James Daunt said, it was “frankly not profitable enough” – even though the business had made some profit in recent years as part of Daunt’s turnaround scheme that brought the retailer back from the brink.

“Everyone’s under pressure to reduce costs, but the focus is often too much on that and not enough being an employee first business”

To make matters worse, a total of 1300 writers including Sally Rooney, Kerry Hudson, David Nicholls, Michael Rosen and Val McDermid backed the campaign for Waterstones shop floor staff to be paid the real living wage rate.

Meanwhile, the retailer said that compared to other similar large retailers, only Ikea, Majestic Wines and Lush Cosmetics have committed to paying the real living wage rate.

Speaking to Retail Gazette, Martin Newman, author and founder of The Customer First Group, said, “Unfortunately a number of retailers will look to stretch the rules as far as they can.”

“Everyone’s under pressure to reduce costs, but the focus is often too much on that and not enough being an employee first business.”

However, Helen Jamieson, chief executive of nationwide HR consultancy Jaluch HR, said that sometimes large retailers can get away with overlooking pay rates but they tend to have more of a “spotlight” on them than smaller retailers, so neglecting employees’ needs “doesn’t always work in their favour when it comes to press attention”.

When commenting on Sainsbury’s initiative to get rid of paid breaks, Jamieson said: “The likes of Sainsbury’s are working with bigger numbers so it’s easy to see what the financial savings might be by changing things such as paid breaks.”

“The broader employee offer can be more important to some individuals than the pay rate”

“In a small owner managed shop for example the financial impact would likely not be measured.”

The BRC told Retail Gazette that retail colleagues favoured flexibility and work location above salary regarding employee satisfaction.

“The broader employee offer can be more important to some individuals than the pay rate,” BRC employment and skills policy advisor Fionnuala Horrocks-Burns said.

“Wage increases will only serve as a short-term benefit”

“For the third year running, retail colleagues rank flexibility in hours and location of work as the top two drivers for working in retail, pay ranks fifth.”

In 2016, Lidl announced it would adopt the new Living Wage Foundation pay rate for its employees and thus became the UK’s first supermarket to do so.

It’s shopfloor staff’s hourly wage rose from £7.50 per hour to £8.45 – well above the National Living Wage.

Meanwhile, in January Aldi became the UK’s best-paying supermarket after it increased its store staff’s hourly pay rate from £9.10 to £10.41, surpassing the Living Wage Foundation’s recommendation of £9 per hour nationally.

As much as it resembles a domino effect, the grocers have been performing significantly well since the reports, with Lidl booking a 16 per cent rise in Christmas sales, and Aldi reporting its best ever UK Christmas trading period.

So then, while higher wages will always be appreciated by workers, by voluntarily increasing salaries in the way that Aldi and Lidl have done, employers send a clear message to the UK workforce and show that they do care and then potentially retain their employees.

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