John Lewis to target staff pay rises in shake-up

Partnership bosses warn 76,000 workers that they may receive smaller wage increases amid turnaround

JOHN Lewis has warned staff they face smaller pay rises under proposals to “reset” salary policies and give the business greater financial breathing room during its turnaround.

The partnership, which also owns Waitrose, is understood to be consulting on changes to its constitution that senior leaders say would give the business more “flexibility” and put it on a more “sustainable” footing.

Management, led by Dame Sharon White, would be handed more power to control performance-linked pay rises under the proposals. The partnership warned that fewer staff were likely to qualify for the highest tier of salary raises in future under the plans.

It comes as the retailer battles to turnaround years of underperformance. However, the proposals risk inflaming tensions between management and staff, with relations already strained.

Staff have been told John Lewis needs to “radically shift” how it decides performance-linked pay rises, making sure it is reserved for those who “consistently make an exceptional contribution to the business”.

As a result, “a smaller number of us will achieve this because we’re resetting expectations,” staff were told in a recent presentation. Performance-linked pay rises would also “likely be smaller than in the past”.

Management are seeking greater powers to limit pay increases in case John Lewis needs to divert cash elsewhere. John Lewis employs more than 76,000 workers across its department stores, supermarkets and in head offices who are expected to be affected by changes. It spent £1.8bn on staff in its last full year on revenues of £10.5bn, making pay one of its biggest costs.

Partner pay is raised by a set baseline each year. However, under the current partnership constitution, all staff can earn a bigger salary uplift if they hit performance-linked targets.

Executives have the right to waive performance-linked pay rises each year but only if the John Lewis staff council agree. They have done so for the past two years.

Under the changes to the constitution put forward, the need to first seek approval from the staff council would be waived in certain circumstances.

One proposal is to insert a caveat saying performance-linked pay rises would be offered “unless there are exceptional circumstances where this should not apply”. Another amendment suggests adopting the pay policy “unless there is a reasonable need not to, such as conserving resources”.

Performance-related pay rises are separate to the partnership bonus, awarded to all staff. The proposals put forward do not affect the bonus.

In a briefing to workers this month, the John Lewis Partnership said it needed to “reset how each of us contributes to the success of our business, every day”. The presentation said: “Our approach must be sustainable so contribution-related pay will likely be smaller than in the past.” Workers on the John Lewis staff council are expected to discuss the changes in the coming weeks. They will vote on them in March.

A John Lewis Partnership spokesman said: “With customer expectations rising all the time, we’re setting the bar high on what great performance means for the Partnership.

“As an employee-owned business it’s right that we’re transparent with our Partners and set clear expectations around what they need to do to achieve additional performance-related pay.”