Analysis: How will retail react to Amazon’s pay hike?

The online titan will pay all of its full-time, part-time, agency-hired and seasonal employees in the UK £9.50 per hour from next month. Those working in distribution centres in London will receive £10.50 per hour.

Amazon said the move will result in pay hikes for 37,000 employees – and the pressure could now be on fellow retailers to increase pay in a similar fashion.

A host of retailers including John Lewis, Aldi, Lidl and Boots, currently pay less than Amazon’s new rate to their lowest-paid warehouse employees.

Tesco did not disclose its rate of pay for distribution centre staff, but boss Dave Lewis insisted at its interim results earlier this month that its rates were “in line” with Amazon’s.

Its big four rival Sainsbury’s said it already pays a minimum of £10.95 an hour to warehouse workers – the only business to respond to Retail Week’s request that pays more than Amazon.

Tony Gregg, chief executive of retail executive search consultancy The Anthony Gregg Partnership, believes bricks and mortar retailers will be forced to follow suit – but will not do so instantly.

“With everything going on in the marketplace I can’t see people in retail [raising the minimum wage] because there are so many other costs,” he says. “I can’t see how this will speed them up.”

Gregg believes it will eventually lead to wage increases across the board, however, as Amazon’s rivals scramble to retain staff.

He adds: “There is always someone who pays 20p an hour more and retailers will want to stop people leaving after six months.”

Scott Dance, UK procurement engagement director at Hays, doesn’t necessarily believe retailers will attempt to compete with Amazon’s deep pockets when it comes to pay rates.

Instead, he suggests businesses will have to think harder about their overall culture and other perks if they are to woo new employees.

“If businesses don’t match, or are unable to match, Amazon’s pay rates, they will need to think of other ways to be able to attract staff,” he says.

“That could be things like flexible working in terms of different shift patterns. For people with families, for example, working 1pm-9pm means you can’t necessarily do things in the evening. But they might be willing to give up £1 an hour to work 11am-7pm. It’s a different attraction strategy.

“The culture is also important. If you work at Amazon for a bit more money, but the culture isn’t great and you just feel like a cog in a big wheel, are you more likely to go and work for a business where you feel like part of a team for £1 less an hour? Probably.”

For Dance, it is the retailers who employ more technology within their warehouses that will find it easiest to attract staff.

He explains: “There is all sorts of tech that warehouses are embracing, not just scanning, but having robots to help you pick stuff so you’re not doing as much manual lifting, having tech to help you find goods so you’re not walking around the warehouse as much.

“You would probably take a bit of a pay cut if your job was easier and you don’t feel as tired at the end of the day.”

When he revealed details of the pay increases earlier this month, Jeff Bezos said: “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead.

“We’re excited about this change and encourage our competitors and other large employers to join us.”

Its competitors may not be able to follow the lead on wage rates, but they may have to step up their game in other ways to ensure they maintain their best warehouse talent.