LONDON, Feb 19 - Finance leaders across Britain's retail sector have become substantially more worried about the trajectory of labour costs over the coming year after parts of new employment rights legislation began to take effect, according to a trade body survey published on Thursday.
The legislation, approved by Parliament in December as the Employment Rights Act, has been described by the government as the most significant uplift to workers' rights in a generation and a means to reduce disruptive industrial action. While initial proposals for broad unfair dismissal protections for newer employees were pared back, the Act still introduces new provisions on sick pay, restrictions around zero-hours contracts and expanded union rights. Secondary legislation implementing the Act is currently out for consultation.
The British Retail Consortium (BRC) said its survey of finance chiefs in the retail industry found labour and employment costs were now listed in the top three concerns by 84% of respondents, a sharp jump from 21% in the July survey.
Respondents signalled a range of immediate responses to the cost pressures. The BRC reported that 61% of firms plan to reduce total staff hours and/or curb overtime, and 45% intend to institute recruitment freezes. Cost-cutting measures also extend to headcount reductions, with 55% expecting to pare back head office staff and 42% planning cuts to store-level employees.
To compensate for having fewer people on the payroll, 68% of surveyed companies intend to push for higher productivity from existing staff, while 61% said they would invest in automation.
The retail sector is the UK's largest private-sector employer, but has nonetheless seen a loss of 250,000 jobs over the past five years, the BRC said.
On the intended policy aims of the Employment Rights Act, the BRC drew a distinction between objectives and execution. "If the Government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility, ultimately stripping away entry-level and part-time opportunities at precisely the moment the country needs them most," BRC CEO Helen Dickinson said.
The implementation of these labour measures has already coincided with pay actions by some retailers. Several chains, including John Lewis and Sainsbury's, recently announced pay increases that exceeded inflation, moves that the companies said partly reflect another rise in the government's main mandated minimum wage.
Complementary research released earlier in the week by the Chartered Institute of Personnel and Development found more than one in three UK employers plan to reduce hiring of permanent staff because of costs arising from the reforms to labour law.
Taken together, the BRC survey and the CIPD results portray a retail sector actively reassessing staffing models and cost structures in response to a changed legal environment and continued wage pressures. Retailers' stated strategies include trimming hours and roles, freezing recruitment, raising productivity expectations and increasing automation investment as tools to manage higher employment costs.
Sector summary
The retail sector is responding to new labour regulations and rising statutory wage levels by preparing to reduce hours, limit hiring and cut staff at both head office and store levels while accelerating productivity and automation efforts.