Impact of wage rises much higher on convenience retail sector, SGF study finds

Research, published this week by the University of Stirling and the Scottish Grocers’ Federation (SGF), has shed light on the impact of rising staff costs on the convenience retail sector in Scotland. 

On 1 April, the UK National Living Wage rose to £11.44 per hour, a 9.8 per cent increase on 2023/24. However, a collaboration between SGF and University of Stirling has revealed that the true cost for retail employers will be as much as £15.39 per hour, a jump of £1.39 on the previous year and the highest increase for at least the past eight years.  

The study takes into account statutory costs, such as National Insurance and Holiday Pay, as well as additional employment expenses such as uniforms and administration costs.

Meanwhile, a recent survey of SGF members shows that more than 90 per cent of respondents were less likely to hire more staff, due to the wage increases. Three quarters of owners/managers reported working over 65 hours per week, just to keep costs down. 

As a result, additional staff costs will inevitably be passed onto customers, many of whom are also struggling to manage their household budgets. 

“Convenience and independent retailers find it harder to cope with large increases in the National Living Wage, despite their recognition of the need to reward staff for the jobs they do. This is the ninth year that we have looked at the true cost of employment and again we see the pressures on the sector,” Professor Leigh Sparks, of the University of Stirling, said. 

“There does come a point when the cost and management of labour, plus the extreme challenges of actually operating local convenience stores ceases to be viable as a commercial or a lifestyle proposition. If we value the ‘glue’ that local convenience stores provide to communities then we need to show this value to them.”

SGF chief executive Pete Cheema, added: “Convenience stores are at the very heart of their communities. Providing valuable local employment, with flexible hours, but the significant increase to wages year on year means that some stores will need to cut staff hours. Impacting local jobs and overall harming the economy. 

“The pressure of absorbing all the additional costs, both external factors and those implemented by government, is putting businesses at risk. Many simply can’t cope. 

“Government must start to recognise that local stores are economic drivers and provide many benefits for their communities. Without doing more to alleviate the growing pressure on our sector, and accounting for the total cost of employment on top of new regulation, Government are damaging the viability of these essential local business.” 

The True Cost of Employment 2024 paper will form part of SGF’s annual submission to the Low Pay Commission (LPC), for inclusion in its report and recommendations to the prime minister later this year.

The LPC is set to make its recommendations for minimum wage rates by October ahead of new rates coming into force the following April.

Last week, the commission has published its advice to the government on the future of the National Minimum Wage, with recommendations including considering the case of reducing the NLW age of eligibility, reducing the gap between adult and youth rates and reforming the treatment of apprentices.