Minimum Wage – the writing on the wall
By 2020 , the National Minimum Living Wage will deliver a total pay rise of 38.5%, compared to the 2015 minimum wage for colleagues aged 25 and over. In a job market where near-zero inflation is the norm, public sector pay rises are mired at 1.0% to 1.5%.
According to RetailResearch.org (2019), by 2020:
- retail wages will have risen by a total of £2,791.50m
- employer national insurances payments will rise by £385.23m
- extra employer pension contributions £83.75m
Total additional costs of £3,260.48m’
Optimisation of the colleague team has never been more important
The store colleague team is much more than a mere ‘double-edged sword’. It is of course the retailer’s biggest financial cost and its biggest asset. Therefore, in facing these major financial obstacles, optimising the productivity of workforce management and store operations is the key to attaining value and competitive advantage.
Put simply, the customer experience and service will suffer if retailers do not optimise, re-train and invest in their primary asset.
What Will Be The Impact of the NMLW?
The Office of Budget Responsibility (OBR) has stated that job losses caused by the imminent Minimum Wage increases will ‘only’ total 60,000. However, the paper authored by Retailresearch.org predicts twelve key areas where the inevitable impacts will be felt.
1 Price rises – the living wage will increase retailers’ costs in 2020-21 alone by £3,260.48 mn.
2 The NMLW is likely to increase retail prices by about 1.1% per year between 2016 and 2020 – this takes into account the labour shedding and operational changes they bring in to reduce costs.
3 Home delivery charges to increase – introduction of minimum order values for free delivery.
4 Staff reductions – by eliminating one member of staff from a workforce of ‘n’, its hourly wage bill will be back roughly to where it was before the wage rise.
5 Labour force reduction will be at least 60,900 workers or 2.1% of the 2015 labour force. This figure includes part-time workers; full-time equivalents (FTE) job losses should be around 42,000.
6 Store numbers will fall – by around 14,000.
7 A fall in shop numbers of around 10,000 between 2016 and 2020 – with a further 6,274 stores immediately after that.
8 Growth in Self-employed Contractors – who are therefore not subject to the NMLW.
9 Retailers will try to extract better terms from their suppliers.
10 New technology – customers will see more self-service and self-scanning technology, with online retailers also benefitting.
11 Superogatory (‘beyond the strict call of duty’) pay rises – like IKEA, some retailers reflecting on the implications of the NMLW on their own wage structures may decide that it is right and proper to go ahead and pay the LW as a minimum to all their staff.
12 Reworking Staff Bonuses and Benefits Packages – colleagues are highly likely to feel aggrieved if it becomes necessary to reduce staff benefits in order to fund a pay rise for the lowest paid. That is likely to aggravate staff.
Propelling the industry to ‘a more talent-intensive approach’
Sir Charlie Mayfield’s excellent report ‘How good is your business really? Raising our ambitions for business performance’ makes many telling points on retail productivity, including this on the up-skilling of the colleague model. Its relevance to the imminent Minimum Wage rise cannot be over-stressed:
‘This Group has been focusing on how the industry might move away from the low skill low wage model widely adopted at present. They are mindful of the need to move up the value chain to make their sector more competitive in future and to optimise the opportunities of digital solutions in responding more efficiently to changing customer demands for more varied channels for purchasing products… exploring how job redesign and the development of new apprenticeship models can propel the industry to a more talent-intensive approach, where jobs and career pathways are enriched, staff are more motivated and engaged and there are greater chances for progression vertically and horizontally. Developing solutions in these areas are seen as essential to raised future performance across the sector.’
SWL are specialists in productivity improvement, based on forensic analysis of all data, including staff hours, wages and efficiency issues. Call us today on 01527 895020 to arrange a discussion on how SWL can help you to tackle productivity in the light of impending 2020 legislation.