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Some companies’ bonus schemes get attention because they’re so big. Global investment banks are an obvious example. Others are significant not for their absolute size, because of what they represent. That’s the case for John Lewis.
Even in a good year, shop-floor incentives can’t compare with the spoils enjoyed by bankers. The last time John Lewis paid out a bonus, in 2021/22, the pool totalled £46.4mn. At Deutsche Bank, the overall bonus pool in 2021 was €2.1bn.
Yet whether John Lewis awards its staff a percentage of their annual salary as a one-off bonus, or doesn’t, as is happening this year for the third time, matters. Partly that’s because the employee-owned UK company, which also owns the upmarket Waitrose supermarket chain, has created something of a cult around bonus payments. Announcements were, in past years, grand publicity stunts with shop floor workers whooping at its flagship Oxford Street store.
But it also gives clues about the frail state of the retail sector in general. Jason Tarry, who replaced Sharon White as chair of the John Lewis Partnership last year, has explained that the retailer is going to prioritise investment instead. This includes £114mn to lift overall pay. Rates for shop staff will rise by just over 7 per cent.
While it might seem mean to eschew bonuses after a year in which pre-tax profit improved to £97mn, John Lewis is still in turnaround mode. Three of its past five financial years produced losses. Stores have yet to regain their edge relative to rivals such as the resurgent Marks and Spencer. A further £600mn of “self-funded” investment is planned this year.
And even as cash generated from operations rose last year by 23 per cent to £532mn, leaving plentiful liquidity, prudence is understandable. UK consumer sentiment remains brittle. Shares in listed retailers have underperformed so far this year. Among other high-street institutions, Greggs’ stock is down as much as 33 per cent.
Across the retail sector, costs are rising with changes to employers’ national insurance contributions. Smaller retailers, which aren’t so easily able to absorb these through automation, are examining changes to the perks and benefits they provide to staff, according to work by Stirling University’s Institute for Retail Studies.
There is a fine balance, though. Shop-floor staff are vital to delivering improvements and the customer service required to drive sales. If problems such as shoplifting and staff abuse persist, retail careers will become less attractive. Tarry can be forgiven for skipping this year’s bonus, but he would be unwise to ditch the tradition for good.
nathalie.thomas@ft.com
