What does “Flexibility” mean for UK Retailers in an Employers’ Market?

by | Aug 8, 2011

Today, our guest blogger is David Roberts.  David is a keen observer of the European retail industry and has spent 13 years helping retailers improve labor productivity through technology.  David is Axsium’s Sales Director for Retail (Europe) and is based in Worcester, United Kingdom.  – Bob Clements

Much has been written about the UK Sovereign Debt Mountain and the Emergency “austerity” Budget but few commentators see the opportunities that this could provide the UK’s employment market.

Forgive me for stating the blindingly obvious, but with unemployment standing at 7.8% the frame of reference for the average retail employee and union member has changed in recent months. This coupled with changes in the tax and benefits system may give Retailers an opportunity to adopt more flexible US-style contracts which serve customers better and underpin bottom line profits.

Finance Directors and Managing Directors often cite the “benefits trap” as a reason for the lack of flexibility in the lower paid labour markets. Put simply, it does not make sense to earn more because for every pound earned over the threshold then a pound is lost in benefits.

However, the new Coalition Government could be set on a trajectory to change this. Thus far we have seen:

    1. Wholesale changes to Housing Benefits
    2. Increase in National Insurance threshold by £21 per week
    3. Increase in personal tax allowance from £6,475 to £7,475

In short, these measures affect employees at the lower end of the pay spectrum, or more bluntly, employees in the Retail market. Now, I am no Nostradamus; however, it is reasonable to assume that one outcome from the Spending Review published on October 20th will be a significant freezing, if not wholesale reduction, in the amount available in the UK’s benefits system.

What if earning more suddenly became attractive? As a lower paid worker changes in income tax mean that I get to keep more of what I earn, what happens if my benefits reduce am I more likely to work more flexibly? Will I be more amenable to less preferable shifts ? Working during the evenings? Split shifts, weekend work – maybe.

The other side of the equation is the consumer or customer. We already have record levels of personal indebtedness in the UK of £1,444 billion. This means it is more difficult to attract and retain customers.

So, my options as a retailer for differentiation are price and service. Pricing is tricky given the cost of goods and exchange rate so service it has to be. What if I could serve my customers better when they were in my stores say at lunchtime or in the evenings and, of course, at weekends?

“Uh,” moan Finance Directors and Managing Directors. “To do this, I need more flexibility in my labour force and that is a tough cultural transition to deliver.”

But hang on a minute, is this not the same labour force which may be more amenable to change? Now, there is a thought.

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