Zoe Woolacott | 01 Jun 2021

Pandemic leads to a varied landscape for retail pay

The diverse trading conditions experienced during the national lockdowns and tier systems across the UK since the start of the pandemic has put pressure on the retail industry in different ways, resulting in a varied pay landscape. Pay freezes were common in the sector last year, particularly for senior roles, but there were also many high-end increases worth 3% or more for roles considered ‘essential workers’.

Pay rises

Our analysis of pay in retail for 2020 shows that awards in the strongest performing parts of the sector, such as food retail, helped set the median pay award in the sector to 2.5% for the year. This was above the median pay rise for the whole economy in 2020 of 2.3%. So far this trend has continued in 2021 with nearly a third of pay awards in retail and wholesale being worth 3% or more, compared to just 15% across the UK economy.

Role of NLW on pay rates

Our research shows that last year almost half of retailers pay a minimum rate above the statutory floor set by the National Living Wage (NLW). The NLW rose by 2.2% on 1 April 2021 to £8.91 and now also applies to workers aged 23 and 24. This year’s NLW rise is the smallest percentage uplift since its introduction in 2016. However, retailers continue to face pressures on pay due to the impact of the NLW on differentials, as well as other factors such as equal pay claims – on which differences in pay between warehouse staff (mostly male) and retail staff (mostly female) is in focus as part of the ongoing equal pay claims against the ‘big four’ supermarkets Asda, Morrisons, Sainsbury’s and Tesco – and the growing influence of the voluntary Living Wage.

Voluntary Living Wage

The voluntary Living Wage (VLW) is also placing upward pressure on pay both within and outside retail. The Living Wage, as recommended by the Living Wage Foundation, is an estimate of the minimum rate of pay required to meet a ‘socially acceptable’ standard of living. The rates are calculated annually by the Resolution Foundation[1] and are overseen by the Living Wage Commission, based on the best available evidence about living standards in London and the UK. The current estimates stand at £9.50 and £10.85 in those in London. Both Morrisons and Aldi already exceeds the current Living Wage rate and such rates may impact other major retailers as they compete for the same staff. 

Retail job prospects

The retail labour market is in a fragile state, with employment down and unemployment higher, at around 5% (February 2021). What happens to roles that were furloughed will have a major bearing on medium and long-term prospects and some economic commentators are concerned about the possibility that economic demand might not be strong enough to retain all jobs across the sector. When it comes to recruitment, retail caterers face the biggest challenges perhaps because the pay on offer is lower than in other parts of retail, with many prospective applicants attracted to the higher rates of pay on offer elsewhere in the wider retail sector. Retail catering firms also experience some of the highest staff turnover levels in the retail sector.

Want to know more?

IDR’s Pay and The Labour Market in Retail report provides you with a detailed picture of pay in a wide range of retail organisations across the UK. It includes information from 25 firms across the retail and hospitality sectors. The report also provides commentary and insights on the labour market in the retail sector, including redundancy rates.