John Lewis waters down staff benefits as national living wage adds to retail sector pressure

Sir Charlie Mayfield, partnership chairman, said the national living wage had added to existing cost pressures

Sir Charlie Mayfield, partnership chairman, was behind the business review (Rex Features)

John Lewis treats its staff so well that even when it has to cut bonuses, like it did this year for the third year running, employees turn out to celebrate.

Now it seems that tighter purse strings are becoming a regular thing for the department store after it overhauled its membership system in an annual report.

Staff at Waitrose and John Lewis will now be paid "in line with their contributions to creating value", the annual report said.

A probation period of three months has been introduced at a number of branches. Under the rules being trialled, probation can be extended by a month for new employees and three months for those in management roles. During this period staff will be tested on their committment to the company, their level of engagement with the culture and their productivity.

Those staff on probation will get an annual bonus if they were employed on January 31 of each year.

John Lewis is making the changes to combat shifting sands in the retail sector, like the rise of online shopping and the cost of doing business, which has taken its toll on results. It is also planning more regular feedback for staff, peer reviews, help for managers to deal with underperformance and a zero tolerance approach to overdue appraisals.

Sir Charlie Mayfield, partnership chairman, was behind the business review that began two years ago and resulted in the report just released. He said that businesses have to embrace changes in the retail sector rather than resist them.

The national living wage has added another challenge to the mix, he told the Times.

“You can only afford to pay someone more if the value of their contribution is better. What was OK at £7.20 an hour is not okay at £9.20 an hour. Just saying ‘you have to work 25 per cent harder’ is not the answer either, we have to think about how we improve the opportunities the partners have to make money [for the partnership]," Mayfield said.

Businesses have been grappling with the minimum wage since it increased from £6.70 to £7.20 an hour on April 1.

Mark Beatson, chief economist of the Chartered Institute for Personnel Development, has said that the national living wage will result in job losses if the productivity of low-paid employees does not increase.

“Simply making low-paid labour more expensive is not the answer and the Government shouldn’t be surprised if some employers choose easier options, such as reducing hours, chipping away at other benefits or making a less generous pay award the next time pay is reviewed,” Beatson said.