As I See It
Lidl’s pay plan puts more pressure on its rivals
A chorus of opposition has been ringing around the retail and hospitality sectors over George Osborne’s new National Living Wage.
Sainsbury’s, Whitbread, Next, JD Wetherspoon and JD Sports are among the big names who have claimed they cannot afford the hike in pay to tens of thousands of employees.
Lidl has now waded in to the debate. Not by joining the boo boys, but by opposing them and lifting pay for 9,000 of its staff.
It currently pays £7.30 outside London and £8.03 in the capital. These rates will rise to £8.20 and £9.35 respectively, equivalent to a £1,200 a year pay rise, or at least 12%.
Pay will increase therefore to a level that is not only above the current minimum wage, but higher than Mr Osborne’s new living wage. This will start at £7.20 next April, rising to £9 an hour by 2020. Osborne’s living wage replaces the £6.50 minimum wage currently in place, but will only apply to those over the age of 25.
Lidl says it bases its new rates on those guided by the Living Wage Foundation which determines what people actually need in order to meet their outgoings.
The company says the pay award will cost it £9 million, yet it won’t have any impact on the prices of goods which are already making life difficult for the big four from whom it is stealing market share.
It means the German chain will be charging the lowest prices and paying the best wages. Lidl’s compatriate Aldi pays £8.15 an hour, while Morrisons is the best of the Brits, paying £7.79 to some staff. Tesco comes in at £7.39, Sainsbury’s is due to pay £7.36 while Asda is the worst payer at £7.
Lidl’s move has certainly put a fly in the ointment of British businesses who are demanding a rethink from the Treasury.
They have some supporters, including the Office for Budget Responsibility – set up by Mr Osborne – which claims the living wage will cost at least 60,000 jobs, mainly in retail, hotels, restaurants and the social care sectors.
Claims of job devastation were made ahead of the introduction the National Minimum Wage which companies now largely accept.
Whether or not the latest warnings have any merit, Lidl’s move is bound to put pressure on its rivals who are already engaged in cost saving – including store closures and mothballed expansion plans – in order to keep up with the discounters’ keen pricing policies.