Posted: 16/05/2022

Cost-of-living crisis and planned hikes putting employers in a tight spot


Rising labour costs are putting pressure on fine food businesses after a raft of increased payments came into force this spring.

National Insurance contributions, minimum wages and sick pay all rose for employers in April (see box below), while cost-of-living hikes for individuals have further increased the need for payrises.

Shane Godwin, managing director at Kent-based Macknade said margins were “being squeezed” and the food retailer had been forced to raise its own prices.

“Percentages have become a real stretch for us, in conjunction with increases in costs across the board – from energy to goods,” he said. “We are working hard to work out what we can absorb.”

Godwin said there was more natural movement in the labour market after lockdowns eased, and it was taking longer to find the right people to fill vacancies.

“There is a pressure in some areas for wage increases. I think people have been undervalued,” he said.
“If you have a stringent interview process, then you get what you pay for. We have just delivered a big pay increase across the team. We pay above the legal minimum but wanted to make sure we maintained that gap.”

Sangita Tryner, owner of Delilah Fine Foods in Nottingham, said the city centre deli was slowly building its headcount back up after the lockdown periods.

The firm has retained shorter opening hours introduced during the pandemic, serving customers from 9am to 5pm rather than operating a two-shift pattern stretching from 8am to 7pm.

“The cost of labour alongside other costs means we have to work more efficiently to survive,” Tryner said. “We used to sweat the asset of the building but that formula doesn’t work any more.

“It feels like costs are steadily rising so you fight harder to stay still. We are working hard to smarten up menus and be more efficient to work with less staff. It is hard out there, really hard.”

Andrew Goodacre, chief executive of the British Independent Retailers Association, said that on top of rising energy, fuel and rates bills, extra labour costs “are simply not sustainable for many businesses”.
He added that the total wage bill for an average small retailer would increase by £6,000 per year under changes to minimum wage levels.

“With everything else going up, it will lead to less employment in these businesses,” he warned. “We want to see people earn a fair wage in retail so these increases should have been offset by changes elsewhere.”

What do increased staff costs mean for retailers?

Sangita Tryner, Delilah Fine Foods, Nottingham

“The cost of living is going up. People need the money; you can’t begrudge a wage increase. Businesses are fighting over good staff at the moment, I want to keep hold of mine, to reward them, try to prove that we value them. But high staff costs does hinder what we’re doing. Anything new we start, we can’t just get people in and have a go.”

Shane Godwin, Macknade, Kent

“There is a reality of how much Covid has cost the Government and we have to pay that back. There will be less money in individuals’ pockets for a number of years and it is a similar story for businesses – margins are a bit tighter. We have to make sure we survive. We have to keep going with hard work and number crunching.”

Andrew Goodacre, British Independent Retailers Association

“It is ultimately very difficult for a business. We have seen wage inflation, with large business offering signing-on fees to new employees and nearly all supermarkets paying more than minimum wage. We understand that workers have to balance their own personal budgets when deciding where to work. It will ultimately result in skills shortages in those businesses that cannot compete.”

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