How to deal with recent retail wage increases

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Caroline McEnery of HR and Business Solutions details recent pay structure changes for some Mandate workers, and how best to deal with the pressure this exerts on smaller retailers to likewise increase wages



8 August 2012

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In April 2012 Mandate, the trade union which represents the vast majority of retail sector workers, secured a 2.5% pay increase for over 3,000 staff at Marks & Spencer in Ireland. Then in late June 2012, Mandate successfully negotiated a 2% pay increase for 13,000 staff at Tesco. Mandate recommended the deal to its members at Tesco and it was reported that when put to ballot a majority of 79% voted in favour of the pay increase. Under the agreement, it was outlined that from 1 January 2013 a pay increase of 2% will apply to all staff for the period up to and including the end of February 2014.

This is the first pay increase Tesco staff have received in over four years and the retailer did not require any major concessions from employees in return. According to Mandate, the pay increases agreed with Marks & Spencer and Tesco set a significant benchmark. This point is highlighted by the fact that Tesco is the largest retail employer in Ireland. It is reported that Mandate will now actively seek for this trend to be followed across the retail sector and hopes that it will achieve pay rises for over half of its 45,000 members by next year. This process has already begun – it is reported that Mandate is seeking wage increases for 3,500 staff at Penneys, 700 staff at Boots, and 4,500 staff at Dunnes. Penneys and Boots have agreed to talks on the issue.

Large, UK based retailers such as Tesco and Marks & Spencer have weathered the economic downturn to a certain degree and it is important that Mandate focuses its attention on these businesses that are in a better position to afford a pay increase. Profitable retail businesses are generally happy to pass some of their profits on to hardworking employees. However, it is unlikely that the wage claims will affect retail employers across the board. Many retailers are struggling to survive in an extremely difficult economic environment given VAT increases, reduced bank credit, and the ever-present rent and rates costs. These employers simply do not have the ability to implement a pay increase. This is highlighted by the fact that the second quarter of 2012 is the 13th consecutive quarter of decline in the retail sector in Ireland. The outlook for the immediate future of the retail sector is similarly negative. The focus should be on maintaining jobs in the retail sector through pay freezes and cost-cutting measures, rather than attempting to implement unrealistic wage increases that may force already desperate retailers into liquidation, resulting in further job losses. The Joint Labour Committee agreement on terms and conditions for the retail sector, which was ruled as unconstitutional by the High Court in July 2011, already sets excessive wage rates for the retail sector and therefore a further increase on the already high wage costs for struggling retailers would be illogical.

Managing payroll costs

It is important that under pressure retail businesses successfully manage payroll costs in order to remain competitive and ensure the future of their businesses. Many retail sector businesses are currently restructuring and reducing their workforce and as a result we are dealing with many queries in this area. Honest communication with employees throughout the process is essential. The first step is to identify the cost savings you need to make and identify the best approach to ensure the maximum saving is achieved.

Explore options

We always recommend employers to explore all options to reduce payroll costs. For example, pay reductions, renegotiation of employee terms and conditions, or unpaid leave. Short time or layoff are both short-term measures and should be viewed as such. It is important to remember that all changes to terms and conditions of employment must involve consultation, negotiation and agreement in writing with the employee to ensure compliance with the Payment of Wages Act, 1991. Redundancy should be a last resort and good handling of the redundancy process is vital not only from a legal point of view but for an employer’s reputation, existing workforce and the public at large.

Implementing changes

We have found that trade unions such as Mandate have been cooperative and helpful in the event of a genuine need for a pay cut or other changes to terms and conditions of employment provided that proper consultation and negotiation takes place and correct procedures are followed. After all, it is in the mutual interest of the employer and the employees that the business survives and jobs are maintained.

Caroline McEnery of HR & Business Solutions specialises in HR advice for the retail sector. For advice on payroll costs, redundancies or any other HR related issues please contact Caroline or any of the team at HR & Business Solutions on 087-9694837 or to discuss your requirements.



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