Webinar: National Living Wage provides retailers with food for thought

Listen to the webinar: Retail and the National Living Wage, featuring Louise Ellis, people director at Majestic Wine, Tom Ironside, business & regulation director at the British Retail Consortium (BRC), and Jason Shorrock, VP retail strategy EMEA at JDA Software.

At face level, the introduction of the National Living Wage (NLW) in the spring was a positive move for many lower-paid retail employees, but the consequent operational changes it brings to the industry's workforce are starting to take place. It will only become clear in the months and years ahead just what is the NLW's ultimate impact on retail.

Many retailers reporting their results to the City in recent months have referenced the challenges they face as a result of the government's decision to implement a legal minimum National Living Wage of £7.20 per hour, which will rise to £9 per hour by 2020.

Carpetright and Dunelm, for example, are among those companies that have referenced the pay increase's impact to their respective cost base, but arguably the most in-detail assessment of the new remuneration policy's effect on the industry came on 15 September from John Lewis Partnership (JLP) chairman, Sir Charlie Mayfield.

In his review of the retail group's first-half finances to 30 July 2016, which saw sales growth of 3.1% but profit before tax not including exceptional items drop 14.7% to £81.9 million, Mayfield said the bottom line had been impacted by a commitment to competitive pricing, developing its service proposition, long-term investment and, importantly, maintaining pay differentials.

He explained that JLP intends to ensure its staff's pay remains "well above the National Living Wage on average", adding that this year's pay review in March saw rates increase by 5.1% on average for lowest paid members of the workforce.

"Additional annualised pay costs for our lowest paid partners will be £33 million greater as a result, whereas had we simply complied with the National Living Wage, costs would have been only £3 million higher than last year," noted Mayfield.

"However, higher pay depends on better productivity and greater contribution and we anticipate that this will mean we will have fewer partners over time as compared to today. We are developing comprehensive plans to enhance job design, progression pathways and development support."

It was against this backdrop of discussion surrounding human resources and the future shape and size of the retail workforce – and on the same day of the John Lewis results announcement – that Essential Retail hosted a webinar panel debate on the subject, featuring Majestic Wine, the BRC and JDA Software.

Majestic is the largest wine retailer in the UK and has embraced the legislative changes as part of a wider HR policy to better reward its staff and managers as it looks to boost employee retention and ensure the company is viewed positively as a business and an employer.

Having received Living Wage Foundation accreditation earlier this year, off the back of its staff being paid around 15% higher than the legally required rate, Majestic's people director Louise Ellis explained on the webinar: "Majestic acquired Naked Wines back in 2015 and with that acquisition came our CEO, Rowan Gormley, and his ethos is about creating good jobs for the employees who work within Majestic Wine [and] doing the right thing for the people who work for us, our customers and our suppliers.

"He is very much of the view that everyone at the company should be rewarded for its successes – not just those at the top of the business."

On the decision to raise minimum pay rates, Ellis added: "What we're seeing already is better productivity from our people.

"We strongly recognise that people working at Majestic are making Majestic successful – we feel it's what sets ourselves apart from our competitors and we know without our teams in the stores, support centre and distribution centres we wouldn't be able to provide the level of support our customers need."

JDA's VP for EMEA retail strategy, Jason Shorrock, discussed how investment in technology and digital tools can help retailers as they battle the "perfect storm" of a rising cost base, more demanding customers and an increasingly competitive environment.

Reflecting on recent JDA research into retail CEO challenges, he said: "One of the themes we see is retailers trying to work out how to become more profitable, how they can protect margins in this new world. Obviously, the living wage is bringing the staff aspect of that into more focus."

Tom Ironside, the BRC's business & regulation director, suggested retailers will continue to reference the National Living Wage as an operational challenge for months to come yet.

He remarked: "It is a significant additional pressure on businesses which in the terms of a business planning cycle was unplanned for many companies. While lots of them were looking at the challenges around progression or they may have been looking at productivity, which is long-standing and well understood, it was a relatively surprising move by the chancellor in July last year to introduce this measure.

"Because the government has set out a path to 2020 which averages out somewhere around 5% year on year in terms of the National Living Wage increase, for an industry like retail it's a real issue."

Listen to the webinar: Retail and the National Living Wage, featuring Louise Ellis, people director at Majestic Wine, Tom Ironside, business & regulation director at the British Retail Consortium (BRC), and Jason Shorrock, VP retail strategy EMEA at JDA Software.

Click below for more information:

Essential Retail's webinar on retail and the National Living Wage ran in association with JDA