Forget the ghosts and ghouls, black cats and bats that will come out for Halloween today – there’s something else giving retailers nightmares.
The national living wage – the brainchild of former Chancellor George Osborne – has been sending shivers down the spines of businesses ever since he revealed the policy back in July last year.
In the months that have followed, retailers have been grappling with their cost bases as attention turned not just to how they can pay their shopfloor staff at least £7.20 per hour today, but how they can afford the rather frightful figure of £9 per hour come 2020.
Tesco, Marks & Spencer and B&Q are among the high-profile retailers that have come under fire for making changes to premium pay rates and employee benefits in order to foot the national living wage bill.
The latter pair, in particular, have faced the wrath of petitioning employees and outraged MPs as they adjust to ghastly growth in their employment costs.
This week, the issue will fall under the political microscope once again, when Parliament will debate what MP Siobhain McDonagh has dubbed “the unscrupulous employment practices” at M&S and B&Q.
In what is ’Living Wage week’, MPs will spend three hours on Thursday debating whether using the national living wage as a reason to “drive down conditions and take home pay is against the spirit of the law”.
“Across the sector, the British Retail Consortium estimates that the implementation of the national living wage and similar cost pressures will result in the loss of 900,000 jobs”
They will also call on the government to “close down the loopholes that make this possible” and argue that moves to reduce the value of the national living wage below £9 per hour in 2020 are “unacceptable.”
There is a reticence in retail to discuss it on the record, but the thought of paying all employees at least £9 an hour has spooked plenty of board level directors.
Iceland’s boss Malcolm Walker has already warned that achieving that target will be “painful”, while John Lewis Partnership cautioned that it will have fewer partners in the future as a result of increasing wages, among other factors, and the need for greater productivity.
It is a problem that is far from exclusive to John Lewis. Across the sector, the British Retail Consortium estimates that the implementation of the national living wage and similar cost pressures will result in the loss of 900,000 jobs.
For some retailers, paying all employees £9 per hour will effectively wipe out their profits, unless measures are taken to restructure cost bases, drive productivity and efficiencies or increase automation.
With such a gloomy backdrop, retail will be listening intently to what MPs have to say on Thursday.
Depending on the outcome of the debate, parliament could keep the grim reaper from retail’s door, or effectively put the final nail in the coffin for some firms that are already struggling to stay afloat in a turbulent and uncertain post-Brexit climate.
Now that is a scary thought.
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