Figure 1 provides a comparison between the leading supermarkets' base pay-rates for hourly workers in comparison with the real Living Wage. Asda, LIDL, and Aldi are the top-paying retailers, however, there is a number who have raised base rates to above £10 per hour, which is above the current real Living Wage across the UK.
Figure 1: Retailer base rates for hourly workers and other benefits compared
There is strong academic evidence to show raising wages of frontline workers is good for business
Raising wages of the lowest-paid has demonstrable business benefits for the company and investors. Professor Zeynap Ton, MIT Sloan School of Management, has spent fifteen years studying the relationship between job quality and other indicators of business success. She argues that companies that invest in their workforce and develop a ‘Good Jobs Strategy’ can create operational efficiencies, reducing prices, and increasing productivity and quality, leading to happier workers, customers, and investors.
Many of the original insights that led to the development of the Good Jobs Institute founded by Ton were drawn from the retail sector and it has a wealth of case studies drawn from the retail sector.
Furthermore, there are clear benefits of accreditation rather than just matching the Living Wage. In research by the Cardiff University Business school, the benefits that retailers have experienced from accrediting have been greater than other industries: 89% found paying the Living Wage enhanced their reputation; 70% found it improved relations between staff and managers; 57% saw an increased commitment of Living Wage employees; 62% saw an improvement in recruitment for jobs at the Living Wage.
Accreditation with the Living Wage ensures that all supermarkets implement the uplift at the same time in April and ensures a future commitment to matching the cost of living.
Case Study: Sainsbury’s Shareholder resolution - 2022
A group of 10 institutional investors with £2.2tn assets under management including Legal and General Investment Management, Fidelity International, Nest Pensions, and Joseph Rowntree Foundation*, co-ordinated by ShareAction, filed a special shareholder resolution at Sainsbury’s in February 2022calling for the company to accredit as a Living Wage employer by July 2023, and to commit to paying all workers a real Living Wage.
ShareAction’s Good Work coalition has been engaging the supermarket sector on the Living Wage since 2013. The group decided to escalate engagement on the supermarkets after prioritising the sector for deeper engagement during the pandemic. ShareAction and the investor coalition called on all supermarkets to accredit as Living Wage employers. Despite enhanced engagement, the group had not seen the supermarket sector actively consider accreditation despite making uplifts for directly employed staff.
Sainsbury's is the second-largest U.K. grocery chain with 16.5% of the market. It operates over 600 supermarkets, and 800 convenience stores and directly employs 189,000 workers. Sainsbury’s has a strong reputation as a responsible retailer and has a track record of meeting voluntary standards which reflect societal expectations of supermarket retail. Despite this Sainsbury’s has not met the Living Wage standard.
The resolution asks Sainsbury’s to:
- Ensure all direct workers, in all areas of London and across the UK, are paid at least the real Living Wage rate now and in the future;
- Conduct an analysis (by July 2023) of third-party contractors used by the company to find out how many workers earn below the real Living Wage rate for their region and agree on a timescale for contracts to be uplifted to the real Living Wage;
- Work with third-party contractor providers to lift all subcontracted workers to the real Living Wage rate by July 2026 and to agree to a wage floor of the real Living Wage on an ongoing basis.
It will be voted on at the AGM on 7th July. ShareAction encourages all investors to vote for the resolution.
* The full list of co-filers is as follows Actiam, Brunel Pension Partnership, Fidelity International, Friend’s Provident Foundation, Guy’s and St Thomas Foundation, HSBC Asset Management, Islington Pension Fund, Joseph Rowntree Foundation, Legal and General Investment Management, Nest Pensions & ShareAction.
For details on why investors should support the resolution please read this briefing.
On hours, contracts and sick pay data is scarce but there seems to be a diversity of practice
The base rate of pay is not the only marker of the quality of a job. Those in insecure jobs often worry about the number of hours, visibility of shifts, and their contract types, as well as opportunities for progression. The Covid-19 crisis has underlined the importance of being assured sick pay with many including the OECD pointing to the importance of sick pay in the reduction of transmission.
Companies are not obligated to disclose data on the pay and conditions of their lowest-paid workers and contractors, despite the importance of these markers of good quality work. It is difficult to get good quality comparable data on these types of corporate workforce policies and practices. For example, only three publicly listed UK supermarkets – M&S, Sainsbury’s, and Tesco - are currently reporting to the Workforce Disclosure Initiative.
Figure 3 shows hourly worker survey data collected by Breakroom.cc, a data platform and job comparison site for hourly workers, established with support from the Resolution Foundation. Breakroom’s data provides an important source of information on what workers experience rather than what corporate policies say. It is important to note that the data from Breakroom is for frontline retail staff and not for other workers employed by the supermarkets, such as warehouse and fulfillment centre workers. Contract cleaners and security guards are also not included as they are subcontracted and are likely to have the most insecure patterns of work.
That having been said, Figure 3 shows that supermarket policies and practices vary widely. Aldi, Lidl, Ocado, and Waitrose are viewed as having better policies. Workers at Waitrose, Sainsbury’s, M&S, and Morrisons are more secure about being paid if they were taken sick. On-shift visibility, Ocado and Lidl are clear leaders with 71% of Ocado workers saying they get four weeks-notice and 84% of Lidl workers saying they get over three weeks-notice of shifts. Compared with last year, however, there has been an across-the-board increase in the number of workers reporting they would not be paid sick leave; generally, workers are reporting less visibility of their shift patterns. Unions have criticised the supermarkets for rescinding Covid related sick pay arrangements.
The diversity of practice combined with the lack of a requirement to disclose performance suggests that retailers are not really considering the wider quality of job provision as an area for competition.
Figure 3: Hourly Workers comparison of retailers’ workplace policies
Retailers have some of the highest pay ratio disparities of any sector and this amplifies the moral case for paying the Living Wage
UK-listed companies are now required to publish pay ratios between the highest paid, the median, and 25th percentile – the lowest-paid employees. It is important to note that contract staff such as cleaners and security guards are not included in pay ratio reporting, meaning those on the lowest pay and with the most insecure work are not captured in these metrics.
Despite these flaws in scope, the retail industry has among the highest average CEO/median employee ratio of 114:1. The High Pay Centre has observed it would take just 23 hours and 15 minutes – or just under two day’s work – for the average supermarket CEO to earn the annual salary of a shop floor colleague on the minimum wage)
Figure 4: Retailers CEO/Median & CEO/25th percentile pay ratios
Retailers argue that these pay ratios are justified due to the complexity of running such large organisations, however, these large pay gaps are a visible sign of wider inequalities in society. They are a constant reminder of how low retail workers’ wages are at the bottom of the company. Large pay ratios are likely to be increasingly scrutinised as we move out of the pandemic. They provide another reason for investors to be interested in the pay and conditions of the lowest-paid retail staff.
Investors of course can revolt against high Executive pay as was demonstrated in May when 30% of investors voted to reject the overall remuneration package at Ocado. ShareAction believes alongside taking action on high pay that shareholders should be taking action on low pay too.