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Retailers call for a cap on minimum wage increases

Last week the trade body for independent retailers, BHF-BSSA, called for a rethink on the national mini-mum wage after a survey it conduc-ted showed there were large discrepancies in its impact across the UK.

According to the association’s Wages Survey 2010, which questioned more than 300 independent retailers across the UK over the summer, the average starting wage at London retailers is £1.23 above the minimum wage - compared with just 46p above the minimum wage in the North and in East Anglia.

Almost half of retailers in the North had reduced their headcount as a direct result of the policy, and small businesses in particular said they faced the dilemma of whether to maintain pay levels or cut staff.

Collision course

The added pressure of the economic downturn means that retailers are now feeling the impact of successive wage rises over the past couple of years and are set for further pain this month when the national minimum wage rises 13 pence to £5.93.

BHF-BSSA group communication director Michael Weedon said: “More than six out of 10 shops have not been able to give a pay rise to their staff in the past year. The national minimum wage goes up in October. These two facts are on a collision course.

“The survey showed just how important this is in a relatively low paying sector. Three in 10 retailers have reduced staff hours and 13% have cut jobs. Four in 10 say that they have reduced staff numbers as a direct result of the national minimum wage. In the North, every second shop has cut staff.

“To the surprise of nobody, pay rates in the capital are more than 23% higher than in the lowest paying regions. The variations across the country must make you wonder if there is any logic at all in the existence of a flat national rate. Given this and the effects on jobs and the businesses that sustain them, it looks increasingly as though the national minimum wage is overdue a complete rethink.”

According to the survey, 43% of all retailers said their profits had been impacted by the national minimum wage. In Scotland that figure rose to 72% and, although the overall figure was substantially lower than last year’s 62%, smaller businesses are suffering disproportionately. Some 54% of indies with turnovers of £200,000 or below said the national minimum wage had hit their profits, compared with just 22% of businesses turning over between £3m and £10m.

It is an irony that the national minimum wage is aimed at protecting low-paid workers, but rises increase the risk that they will be made redundant.

Some 39% of respondents to the survey said they had reduced the number of staff as a result of the minimum wage. The North was the worst hit region, with 49% of employers cutting staffing levels - although smaller companies cut less than large companies with turnover between £3m and £10m.

Morale without money

Anne Horton, chief executive at Tunbridge Wells-based independent department store chain Hoopers, which employs 550 staff across its five stores, says: “We don’t have anyone on minimum wage, but we have some that are close to it, and of course every year we look at the staffing costs. Increases will have an impact and no one likes costs going up.”

But cutting staff impacts morale, so how else can retailers manage the pay rise? Patrick Ritchie, owner of two-store menswear business Signature in Aberdeen, says that paying significantly above minimum wage is necessary for a business that wants to have motivated staff and offer a good quality of customer service. His business also finds ways to reward staff other than pay rises.

“The staff get a bonus, so if I do well, I pass it on. If I’m not doing well, they can’t expect that I will be able to pass it on,” he says. “They also get a clothing allowance and a discount, and if they are out and about looking good it benefits me too.”

Steve English, manager of men’s and women’s young fashion indie Cooshti in Bristol, said the store’s lowest paid staff received about £6.50 an hour. He said he was reluctant to pay any less so he employs fewer staff than a couple of years ago.

“My staff have had to put up with pay freezes for the past few years, so we have to pay them a proper wage,” he said. “Staffing levels are down about 25% to keep costs down, although this has been achieved by not replacing people who have left [rather than redundancies].”

Calls for a cap

Charlotte Wilkie, co-owner of kidswear indie Charlie Barley in Brighton, added that when one of her staff left at the beginning of the year, she was not replaced.

“We put the money back into the business,” she explained. “Now we are getting someone new but they are only doing one day a week instead of two and the pay will be lower than before. Staffing is expensive. I’m grateful for things like Business Link, which offers free courses for small businesses to train the staff because it’s difficult to find the time.”

The British Retail Consortium (BRC) last week called for a cap of 1.7% for next year’s increase. It said than any increase over 1.7%, the average salary increase for UK workers over the past 12 months, would hinder retailers’ ability to maintain and create jobs.

BRC director general Stephen Robertson said: “There’s a delicate compromise between higher wages and more jobs.

“Anything up to a 1.7% increase in next year’s minimum wage strikes a sensible balance between helping low-paid workers and enabling retailers to create and maintain jobs. It’s the private sector that will drive the economic growth that will provide the jobs and tax revenues of the future.

“But consumer confidence is fragile, while the impact of the Government cuts and nervousness about the housing market are creating a lot of uncertainty.

“Trading conditions are tough. Higher costs, such as next April’s National Insurance increase, will pile on even more pressure. Even a small increase in 2011’s minimum wage could choke off retailers’ vital potential to create new jobs.”

Norwich-based young fashion indie Dogfish employs about 30 staff across its five stores. Co-owner Robin Norton says: “Keeping wages tight is very important right now. Pay has been frozen, but we are trying to move the business forward and cutting staff would make that more difficult. Next year’s increase should be kept down.”

In the fashion sector the average starting salary wage was 66p above the minimum wage, which was lower than the 74p average across all retail sectors. However, it is still above book, toy and music retailers, where the figure was 22p, or department stores, where it was 38p.

Two-store premium menswear independent Giulio in Cambridge employs about 30 staff. Owner Giulio Cinque said the business had become “more efficient” with regards to its staffing but admitted it had also implemented pay freezes.

However, he added: “There are quite a lot of increases, what with VAT as well, and I’m maintaining my margin. Prices will inevitably go up. I’m not apologising for it. We put a lot of effort into our business and staff need to be paid the proper amount.”

A COUNTRY DIVIDED

Average hourly pay rate at UK independent retailers

46p

above minimum wage (North and East Anglia)

£1.23

above minimum wage (London)

Minimum Wage

43%

of all retailers said their profits had been impacted by national minimum wage

54%

of indies with turnovers of £200,000 or below said the minimum wage had hit their profits

39%

of respondants to the survey said that they had reduced the number of staff as a result of the minimum wage rise

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