Rapid economic, regulatory and technological developments in Europe are calling for the retail industry to re-evaluate its compensation strategies. To stay competitive, retailers must consider several trends to ensure that their employee pay strategy promotes talent attraction and retention, maximizes their compensation spend and supports business objectives.
01
Economic uncertainties have affected consumer spending patterns, leading to sluggish sales and unequal growth across retail sub-sectors. This can impact workforce projections as well as retailers’ future compensation strategy.
Our July 2025 Salary Budget Planning Report has found that salary movements for retail businesses from 2024 to 2025 are expected to have a downward trend across nine markets (Table 1).
| Salary Movement Trends | |||
|---|---|---|---|
| Country | 2024 Overall Retail and Distribution | 2025 Overall Retail and Distribution (Forecast) |
|
| Austria | 4.5% | 4.0% | ▼ |
| Belgium | 4.0% | 4.3% | |
| Denmark | 3.3% | 3.5% | |
| France | 3.7% | 3.4% | ▼ |
| Germany | 3.8% | 3.8% | |
| Ireland | 4.0% | 3.9% | ▼ |
| Italy | 3.5% | 3.3% | ▼ |
| Netherlands | 6.0% | 4.0% | ▼ |
| Norway | 3.5% | 3.5% | |
| Poland | 7.0% | 6.0% | ▼ |
| Portugal | 3.8% | 3.9% | |
| Spain | 3.8% | 3.5% | ▼ |
| Sweden | 3.5% | 3.4% | ▼ |
| Switzerland | 2.5% | 2.5% | |
| United Kingdom | 4.0% | 3.4% | ▼ |
Across industries in Western Europe, the primary driver of this dip is cost management, according to 40% of survey participants (country average). Anticipated recession or weaker financial results are also a significant concern, affecting 37% of companies. Meanwhile, 24% of respondents cited inflationary pressures for the change in salary increase budgets .
Geo-economic influences make Europe’s outlook uncertain. Furthermore, retail organisations face the emergence of minimum and adequate wage legislation across Europe and in preparation of the EU Pay Transparency Directive.
Our 2025 Pay Transparency Survey revealed that 67% of companies cited increasing regulatory requirements as a reason to implement pay transparency within their organisation. More than half of respondents (56%) said that their current course of action towards pay transparency is to inform employees about their job level. Meanwhile, 74% of survey participants said they aim to go further by disclosing the hiring rate/range for jobs to external candidates — a topic also covered under the Directive.
02
Europe’s retail industry faces significant recruitment challenges, notably in securing frontline skills and technology talent. An aging population and shrinking workforce demographics exacerbate these challenges, with subsectors like apparel and supermarkets increasingly competing with other industries for talent (Figures 1 and 2).
Roles currently in demand include sales and retail-store associates, while skills which are sought after include sales and customer management. However, retail companies may find themselves competing with other sectors in recruiting critical talent for these roles.
Retail organisations are already grappling with high turnover prompted by low compensation and inflexible hours, necessitating a reassessment of compensation structures and work-life offerings. Yet, new-hire premiums — especially among entry-level roles — are declining across Europe when compared to the more immediate post-pandemic period (Table 2). Less dynamic salary movements are a signal for retailers to assess their compensation packages more holistically to attract and retain key talent in high-demand roles.
| New Hire Pay — Premiums Reducing | ||||
|---|---|---|---|---|
| Country | Intermediate (P2) | Professional (P3) | Specialist (P4) | |
| Belgium | -13% | -11% | -8% | ▼ |
| France | -4% | -8% | 2% | ▼ |
| Germany | -1% | -2% | 0% | ▼ |
| Ireland | -1% | 3% | -1% | ▼ |
| Italy | -8% | -3% | -12% | ▼ |
| Netherlands | -4% | 3% | -2% | ▼ |
| Spain | -5% | 1% | 5% | ▲ |
| Sweden | -5% | -2% | 4% | ▼ |
| Switzerland | -7% | -3% | -3% | ▼ |
| United Kingdom | -4% | 2% | -1% | ▼ |
03
The prevalence of omnichannel commerce and other advanced technologies demonstrate the inevitable digital transformation happening in the retail industry. Retailers will need to align their workforce strategies to adapt in an evolving business environment. Digital roles are still among the top three paying disciplines in the professional intermediate level in many markets, indicating an ongoing growing demand (Table 3).
| Belgium | France | Germany |
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| Ireland | Italy | Netherlands |
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| Poland | Portugal | Spain |
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| Sweden | Switzerland | United Kingdom |
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In particular, the United Kingdom, Ireland, Germany, Portugal and Poland reflect this increased demand for digital roles. It also is worth noting that in the Europe, Middle East and Africa (EMEA), cash compensation is the top driver for attracting digital talent, according to our research.
04
Although organisations are preparing for greater pay transparency, efforts to communicate compensation to their workforce remain a significant challenge. Fewer than one-in-five wholesale and retail organisations are effective in communicating how pay is determined despite 47% believing they promote fair compensation, according to our 2024 Pay Effectiveness and Design Survey. This is a strong indication that organisations need be better equipped to articulate their pay practices to the workforce.
Less than half of respondents said they are effective in driving pay effectiveness objectives; however, there is progress, as respondents reported that they already have taken action on annual incentive design and pay management processes to make their pay programs more effective. Employers are also working on their compensation philosophy and leveraging technology to support the administration of their compensation programs.
05
At the core of successful compensation strategies lies a strong culture and employee value proposition (EVP). Organisations with effective EVPs tend to view total rewards as an investment rather than a cost.
That said, despite 57% of wholesale and retail businesses having a formal non-executive compensation philosophy, only a quarter have updated it in the past year. Notably, organisations with updated and effective compensation philosophies are more likely to outperform their peers.
Wholesale and retail organisations say talent attraction and retention are the top reasons for updating their compensation philosophy. After all, our 2024 Global Benefits Attitudes Survey also found that pay and bonuses are the top factors for talent attraction and retention.
However, most retail businesses surveyed said their current pay programs have employee attraction and retention as objectives but are ineffective in those efforts. Just 16% of organisations reported that they are effectively communicating their pay programs to prospective employees.
Moreover, wholesale and retail organisations said they have taken action or are currently acting on changing their base salary structure, acknowledging salary compression exists or could become a problem in one to three years. This is important to note, particularly considering upcoming pay transparent regulations.
06
A mix of offerings has emerged across total rewards programs (e.g. incentives, global minimum standards, governance, approach to centralization). In the current fast-changing geo-economic landscape, retail organisations already are taking steps to adjust their base salary structures and annual incentives, aligning with incoming minimum wage and pay transparency regulations.
Internally and externally, the industry must enhance communication around pay philosophy and leverage technology to ensure transparency, effective delivery and governance.
Europe’s retail organisations must closely look at various regulatory, economic and technological developments, as well as how these impact their business, demand for talent and compensation strategy. The integration of technology via omnichannel commerce reveals the need for digital talent; subsequently, organisations need to rethink their compensation strategy.
By refining salary structures and leveraging benchmark data, retailers can enhance talent attraction and retention, ensuring an optimized investment in their salary budgets. Looking forward, a well-communicated and strategic approach to compensation will be crucial for sustained success in the competitive retail environment.
