Management led by Dame Sharon White will have more influence on performance-linked pay rises, according to latest proposals
John Lewis has warned staff they could face smaller pay rises under proposals to “reset” pay policies and give the business more financial breathing space as it turns around.
The partnership, which also owns Waitrose, is understood to be advising on changes to its constitution, which top executives say will give the business more “flexibility” and put it on a more “sustainable” footing.
Under the proposals, management, led by Dame Sharon White, would be given more power to control pay increases based on performance. The partnership warned that fewer employees were likely to qualify for the highest level of pay rises under the plans in the future.
It comes as the retailer struggles to turn around years of underperformance and pilot improvement. However, the proposals risk increasing tensions between management and staff in an already strained relationship.
Staff have been told John Lewis needs to “radically change” the way it decides on pay rises based on performance, ensuring that it is intended for those who “continuously make exceptional contributions to the business.”
As a result, “Few of us will achieve this because we are resetting expectations,” employees were told in a recent presentation. Performance-related pay rises are also “likely to be lower than in the past”.
Management is keen to limit pay rises in case John Lewis has to redirect money elsewhere.
There are more than 76,000 staff across John Lewis department stores, supermarkets and head offices who are expected to be affected by the changes. In the last full year, the company spent £1.8 billion on staff and generated revenue of £10.5 billion, making pay one of John Lewis' biggest expenses.
Partners' pay rises by a set amount baseline every year. However, under the partnership's current constitution, all employees can receive a larger salary increase if they achieve performance-related targets.
Managers have the right to refuse annual performance-related pay increases, but only with the consent of the John Lewis staff board. They have been doing this for the past two years.
Under the proposed constitutional changes, the need to first obtain staff council approval would be eliminated in certain circumstances.
One proposal is to add a clause stating that pay increases based on performance would be offered “unless exceptional circumstances arise where it should not apply.”
Another amendment proposes adopting a pay policy “unless there is a reasonable need not to do so, such as to conserve resources.”
Performance-based pay increases are separate from partnership bonus awarded to all employees. Offers made do not affect the bonus.
At a staff briefing on the proposals this month, staff were told: “Our aim is to reward exceptional contributions every year, but sometimes there may be years when we cannot do this – because it depends on how the partnership works. the critical investments we need to make and a host of external factors.
“To provide us with the flexibility we need, we have prepared proposed rule changes.”
At a briefing this month, the John Lewis Partnership said it needed to “reset the way each of us contributes to the success of our business every day.”
The presentation said: “Our approach must be sustainable , so the contribution The wages associated with this are likely to be less than before.”
Workers on the John Lewis staff council are expected to discuss the changes in the coming weeks. They will vote on them in March.
A spokesman for the John Lewis Partnership said: “As an employee-owned organization, we put our partners first and remain committed to rewarding their hard work.”
“We are simply being transparent with partners: creating a level playing field and set clear expectations about what they need to do to achieve additional performance-related pay.”
The proposals come at a sensitive time for the partnership, amid signs of growing tensions between management and staff.
The proposals come at a sensitive time for the partnership, amid signs of growing tensions between management and staff.
The proposals come at a sensitive time for the partnership, amid signs of growing tensions between management and staff.
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In a vote last year, the staff council said they had no confidence in the progress of the business under Dame Sharon's chairmanship, although they supported her continuation in a second vote.
John Lewis is trying to turn things around after significant losses. Last September the company pushed back its targets by two years as it struggles to improve performance.
It is now aiming to make annual profits of £400 million by 2028. John Lewis is cutting £600m as part of the plan. spending from the business, on top of the £300 million that has already been spent.
A spokesman for the John Lewis Partnership said: “With customer expectations continually rising, we are setting the bar high for what excellent performance means.” for partnership.
“As an employee-owned company, it is right for us to be transparent with our partners and set clear expectations about what they need to do to earn additional performance-related pay.”
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