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Article | Beyond Data

Shifts in pay among European retailers reflect the race for talent

By Lisa Grunditz and Keith Coull | January 18, 2023

Employers in the retail industry have aggressively recruited and adjusted pay to rebuild business that was decimated by the global pandemic.
Compensation Strategy & Design
Beyond Data

While the past few years have been tough for all businesses, the retail sector was specifically and undoubtedly one of the hardest hit. Perhaps the worst-case scenario in the sector’s history, the pandemic put a significant proportion of the workforce at risk of COVID-19 exposure and infection. Additionally, bottlenecked supply-chain issues were at least partly to blame for faltering demand.

Now that most retailers have reopened and are striving to rebuild business performance, the race for talent has started. In fact, 56% of European retailers have increased recruitment since early 2022, according to WTW’s 2022 Inflation and Reward Actions Pulse Survey. However, many organizations are finding that candidates aren’t in the same place as they were before the pandemic.

Many workers who were made redundant in 2020 and 2021 were able to adapt to their situation and find new ways to make a living – sometimes in other sectors. As a result, 2022’s labor supply has not kept pace with demand. And, based on results from the same pulse survey, the issue reaches beyond frontline workers: Retailers also are facing issues attracting managers (47%), professionals (51%) and digital talent (78%).

We have identified three primary trends that have transformed jobs, compounded current labor market issues and increased the challenge of attracting and retaining talent:

  • The adoption of omni-channel, driven by the increase of e-commerce and the goal to optimize the client experience regardless of when and where interactions take place
  • The acceleration of technology adoption, including AI and robotic process automation
  • Data-driven decisions becoming the rule rather than the exception

So, what role can compensation and HR professionals play to deliver pay and reward programs that will attract and retain retail-sector approach?

Employers listened and learned

The pandemic taught a valuable lesson to all organizations that employ frontline workers. Once viewed as the quiet population who kept the lights on while leadership and HR focused on salaried workers who were perceived to be the more important workforce, COVID-19 pulled back the curtain on the employees who really needed to show up and get the job done.

In 2020, frontline employees earned the label “essential” and often were just that – an assurance for necessary goods and services (and health and safety) at a time when meeting basic needs was uncertain. This lesson will likely continue helping retailers going forward.

Understanding what employees at all levels of the retail sector value will be key in attracting and retaining talent as well as building loyalty. Employers will need to spotlight the rewards programs they offer that speak to the workforce in order to differentiate themselves from their competitors.

WTW’s 2022 Global Benefits Attitudes Survey looked at responses from more than 4,500 employees in the wholesale and retail industry around the globe. The most important reasons that employees cited for staying with their current employers were job security, pay and bonus, their relationship with their co-workers and a sense of purpose. No other sector reflected in the survey results matched these exact answers. See Figure 1.

Figure 1. Retention differences by industry

Top 5 reasons employees stay with their current employer, by industry
1 2 3 4 5
Wholesale and retail Job security Pay and bonus Relationship with co-workers Sense of purpose Health benefits
IT and telecom Pay and bonus Job security Flexible work Learn new skills Relationship with co-workers
Manufacturing Pay and bonus Job security Relationship with co-workers Health benefits Sense of purpose
Financial services Pay and bonus Job security Flexible work Health benefits Relationship with co-workers
Healthcare Job security Pay and bonus Sense of purpose Relationship with co-workers Health benefits
Nonprofit and education Job security Sense of purpose Relationship with co-workers Pay and bonus Flexible work
All industries Pay and bonus Job security Relationship with co-workers Flexible work Sense of purpose
Source: WTW 2022 Global Benefits Attitudes Survey. Sample: All employees except U.S. and Canada which are full time.

Only employees in healthcare and non-profit sectors valued job security as highly, while pay and bonus was the No. 1 reason for all other industries. The relationship with co-workers was ranked as high in manufacturing and non-profits. Also outstanding was that a sense of purpose was either as high or higher in just two other sectors: healthcare and nonprofit.

While pay and bonus came in second as a retention incentive among retail employees, this element should not be underestimated. When these employees were asked what they would consider more important if they were considering moving to a new job with a different employer, pay and bonus ranked No. 1. Job security came in second and sense of purpose dropped to No. 6.

How retailers responded in 2022

The most common action European retailers have taken, according to our Inflation and Reward Actions Pulse Survey, was to increase their originally planned salary budget. 10% of organizations had taken action at the time of the survey, another 15% were planning to take action and 40% were considering adjustments to salary budgets. Greater emphasis on non-financial elements of pay came in second, with 8% of organizations having taken action, 15% planning action and, again, 40% consider action.

Across all industries:

  • The most common action was to place a greater emphasis on non-financial elements
    • 19% had taken action
    • 21% planned to take action
    • 35% were considering taking action
  • The second most common action was to increase originally planned 2022 salary budgets
    • 19% had taken action
    • 15% planned to take action
    • 32% were considering taking action

These numbers also show that the percentage of retailers that took these same actions were fewer compared to all industries. In fact, increasing opportunities under incentive plans was the one action retailers took that beat other industries (8% of retail organizations had taken action, 3% planned to take action, 33% were considering action). This suggests that retailers are looking more closely at variable pay plans than any other industry.

When looking across major European markets (United Kingdom, France, Italy, Germany, the Netherlands and Spain), 2022 median salary increases in the retail industry ranged from 3.0% (Netherlands and Italy) to 4.0% (Germany and the United Kingdom), according to WTW’s December 2022 Salary Budget Planning Survey. These values are more or less aligned with the increases across all industries for most of the countries.

Forecasted median 2023 salary increases are higher than the 2022 increases for all previously mentioned countries with the exception of Germany, which is on par. 2023 median salary increases in the retail industry range from 3.5% (Italy) to 4.5% (the United Kingdom), according to the same survey. These forecasts are higher in comparison to the 2023 figures we reported in the July edition of the survey. The outlook is uncertain due to inflationary pressures and pessimistic economic forecasts. 18.5% of respondents in France, and as many as 28% in the United Kingdom had not yet defined whether there will be a regular salary review in 2023 or if additional adaptations are to be expected.

What 2023 holds for retail employers

While data and its value in staying abreast of market, industry and talent-group changes is vital for decision making, employers in the retail industry have many factors to consider when making decisions in 2023. We mentioned the race for talent, but how long it will last is hard to predict with inflation having a negative impact on consumer patterns. In addition, salary increase indexation and increases to minimum legal wages in certain countries are other important factors impacting retailers’ decisions.

Of course, affordability must be balanced against business pressures among certain talent groups, with organizations targeting the highest retention-risk employees or those with hot skills. Additionally, retail organizations need to think very differently about segmenting employees and the rewards and benefits being offered compared to other employers. After all, roles range from technical, distribution and frontline employees to support centers and administrative jobs.

WTW’s latest Salary Budget Planning Report suggests that more than half of participants across Germany, France, Italy, Spain and the UK have a salary budget projected to be higher for the current cycle. This is a change from originally budgeted projections across all industries. So, how will retail respond in 2023?

From considering off-cycle awards to being agile enough to respond to the market intensity for talent, market insights and data analytics have never been more important for supporting decision making and driving business value.

Director, Rewards Data Intelligence, Work & Rewards
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Keith Coull
Senior Director, Rewards Data Intelligence, Europe
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