A lot of questions have been coming our way about the knock-on impact of the upcoming National Minimum Wage increase, in particular, how stores will be responding across the various levels of the business in order to remain competitive.
This impending increase of €1.40 reflects a 12.4% increase in just 12 months. The NMW increased, in total, €1.85 across 8 years from 2014 to 2022, with yearly manageable increases. However, we are seeing an increase of €2.20 per hour, equating to 21%, in just the two most recent increases. This increase is more than double the rate of wage increases across the state and understandably is having a significant impact on retailers across the country.
The most common question we are being asked is how retailers are responding across the rest of their store’s teams.
Entry Level Management Roles
Trainee Managers, Duty Managers, Team Leaders, and Store Supervisors were typically earning €26,000 to €28,000 a couple of years ago. This was an entry-level role where they gained experience and was a first step on the retail career ladder. The medium here now equates to the 2023 NMW for a 45 hour week.
There are many instances where the rates of minimum wage store staff have increased but this junior level Manager has not moved and so this level are being paid only slightly more than the teams they are managing. So, the issue here is one that impacts the entire store team. And this is what is causing concern for retailers across the country.
In an effort at fairness, many stores are increasing these junior managers’ salaries by the same percentage as the minimum wage increase. This means by the end of 2022 many, if not most of these junior managers were starting at €28,000 – €30,000 PA. However, a 21% increase from 2022 to 2024 would now bring an entry-level, junior management candidate to €36,000! A salary many experienced managers are on. This in turn causes an increase across the next level of managers – from assistant managers to fresh food and store managers. The question is, where does this become too crippling a cost for store owners to bear?
Natural Market Increase
That’s not to say that the minimum wage is a bad thing – indeed – it’s important that all are paid fairly, however, it’s this knock-on effect which needs to be taken into account, to ensure stores stay profitable and all those working are being paid fairly. The low unemployment rate has already caused a natural increase in the minimum wage for good staff over the last couple of years. Meaning that any retailers who worked hard could expect an increase from their employer in order to retain them. This market balance means stores are paying those who work hardest more and have the budget to reward those who deserve it.
Many of the retailers I spoke to are already paying their staff above minimum wage. However, 2024 will force an increase that brings all staff to the same level regardless of their performance.
Other retailers will offset this cost by trimming hours in their stores where possible.
More still will look at their ratio of under 18 staff and seek to balance their wage bill by ensuring they have a mix of under 18 staff and more experienced staff. However, with the current legislation around under 18s selling alcohol and tobacco, this is often not an option!
This 2024 increase will see the “levelling out” of salaries. This means many competing employers will start increasing again in order to attract top talent in a still overheated employment market.
Some retailers suggested that rather than compete with more “wage wars” against other employers they will look at their contracted hours, shift patterns, benefit packages, and reward schemes. This seems to be the most palatable solution going forward as any additional increases past Januarys increase seem most unpalatable.
Considering the substantial increase of 2024, the projected NMW increase of 2025, the additional February Bank Holiday, the additional sick pay, and the auto enrolment for pensions, many retailers will be looking long and hard at their P&L sheets this year end.
2024 will likely see retailers making sure they get the most value for money in terms of new hires, paying a little more for a lot more talent by moving up the ladder to more experienced hires and adjusting their overall packages to remain an employer of choice and attracting the best talent available to drive their stores forward.
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