Managing Retail Compensation and Benefits Programs During Economic Uncertainty
Frontline retail work can be challenging, but it can also be rewarding and serve as a springboard to other opportunities for employees. One of the most critical components of attracting talent in the retail industry is compensation and benefits. Organizations with robust packages will almost always attract more talent than those with below-standard offerings.
This article explores how retailers can scrutinize, design, and manage compensation and benefits programs that attract top retail talent, even during times of economic uncertainty.
Understanding the Evolving Needs of Retail Workers
The needs of retail workers have undergone significant changes in recent years, driven by the COVID-19 pandemic, inflation, price increases, and technological advancements.
The Ongoing Impact of the COVID-19 Pandemic
During the pandemic, retail workers were thrust into the role of essential workers, facing increased health risks and stress while serving customers. This shift highlighted the need for better health and safety measures, improved health insurance packages, and non-traditional health offerings like mental health support.
Job candidates will be more likely to apply for positions that offer good healthcare benefits, mental health support, and guarantees for employee health and safety.
Inflation, Price Increases, and Wages
As inflation and price increases have impacted the economy, retail workers have found their wages increasingly inadequate to meet the rising cost of living.
The Massachusetts Institute of Technology Wage Calculator found that a living wage in the United States had reached about $25 per hour. In this context, a "living wage” refers to an hourly wage capable of supporting a single individual’s needs for food, childcare, healthcare, housing, transportation, and other necessities.
Retail wages have historically been below that amount. According to the U.S. Bureau of Labor Statistics, the mean hourly wage for "Retail Salespersons” in 2023 was $17.64 per hour, with the lowest 10% of wages hovering around $11.50 per hour. Given the impact of inflation and increasing prices, lower wages make applying for retail work less attractive and staying in a retail job challenging, especially for those employees who support families.
Advancements in Technology
Finally, technological advancements have also reshaped the needs of retail workers.
With the rapid growth of eCommerce and automation, many traditional retail jobs aren’t as relevant as they used to be, and many retail workers are anxious that their jobs may become obsolete. One recent study by Gallup found that 22% of workers are concerned about their jobs being replaced by automation, up from just 15% in 2021. Furthermore, 72% of Fortune 500 CHROs foresee AI replacing jobs in their organizations in the next three years.
This has created a pressing need for upskilling and reskilling opportunities to help workers adapt to new roles and technologies. Retail employees now require training in areas such as digital customer service, inventory management systems, omnichannel retail operations, and AI literacy.
Key Focus Areas for Improving Compensation, Benefits, and Opportunities
Although these issues are creating significant challenges in retail hiring, they are not insurmountable. They also offer retailers important insights into what today’s retail workforce values, and thus what they can do to attract and retain workers.
Today's retail workforce values the following:
- Career Development: One of the top reasons frontline retail employees left their jobs in 2023 was to pursue more opportunities for career development, according to McKinsey & Company. Studies suggest that team members who can’t find pathways to progress their careers in retail are willing to accept lateral movements into other industries if they can provide more opportunities.
- Flexibility: Retail workers now prioritize schedule flexibility over other job considerations, including pay. Many companies embraced remote, hybrid, and flexible work environments during and after the COVID-19 pandemic, and many workers are reluctant to give up that flexibility.
- Meaningful Work: Employees want to see the impact of their tasks, engage in higher-level responsibilities, and work in an environment that keeps them excited and energized. According to a report by Forrester, employee engagement has seen significant declines in the past several years, including a 34% decline in 2024.
- Supportive Management: The quality of relationships with managers significantly influences employee retention. According to a report by Gartner, 77% of employees are placing increased importance on manager support compared to previous years.
- Competitive Salaries and Benefits: Consumers are increasingly price-conscious, and they have demonstrated that they are willing to change industries to take advantage of higher rates of pay and better benefits packages. Retailers that offer more lucrative employment opportunities will be able to outcompete others for candidates.
When HR leaders scrutinize their employment offerings, they should do so with these focus areas in mind. They can serve as a starting point to tailor benefits packages for the future.
What Leaders Are Saying:
"If you've been part of a high-performing team where you feel included, your ideas are valued, and your perspective is taken into consideration, you’ll find that you tend to work harder and want to contribute more. There’s a direct correlation between employee satisfaction and customer satisfaction. If you pay attention to your people, they will pay attention to the customer.”
Means of Developing Better Compensation and Benefits
To meet the evolving needs of retail workers, organizations should consider offering improved, and even personalized employee benefits. This approach not only supports retention but also aligns with belonging initiatives by catering to a wide range of circumstances.
Here are some strategies to implement personalized benefits:
- Increasing Base Pay: Increasing base pay to match or exceed market rates is essential, especially considering rising living costs and inflation. Retailers like Walmart and Home Depot have already taken steps to raise wages significantly, recognizing the competitive labor market.
- Performance-Based Incentives: Performance-based incentives, such as commission structures or bonuses tied to individual and team performance, can motivate employees while providing them with opportunities for higher earnings. This approach not only rewards productivity but also aligns employee goals with company objectives.
- Non-Monetary Benefits: Enhancing non-monetary benefits can greatly improve employee satisfaction and retention. Retailers should consider introducing flexible work arrangements, comprehensive health benefits, mental health support, and financial wellness programs. Innovative benefits such as student loan repayment assistance and family-centric policies (like parental leave and childcare support) can also attract a diverse workforce.
- Formal Employee Development Programs: Investing in employee development through training programs and career advancement opportunities will help workers feel valued and engaged in their roles. By creating a holistic compensation strategy that combines competitive pay with meaningful benefits, retailers can foster a more motivated and loyal workforce.
In the past, retailers have also provided employees with innovative benefits through local partnerships, such as partnerships with local childcare providers. Organizations should identify and create a shortlist of opportunities that they can offer employees by exploring locally, as well as nationally.
Offering Workplace Flexibility and Wellness Programs
Flexibility has become a crucial factor in attracting and retaining retail talent. Implementing flexible work schedules can significantly impact your organization's success:
- Reduced Turnover: According to a report, Neiman Marcus saw a 20% decrease in turnover after providing worker flexibility.
- Improved Productivity: Research has directly connected flexible work hours to happier, more productive workers.
- Attracting Talent: Nearly 40% of job seekers consider schedule flexibility as one of their top three considerations, according to a report by Staffing Industry Analysts.
To implement flexible work schedules:
- Utilize on-demand job marketplaces to allow workers to pick up shifts at their discretion.
- Offer various shift options to accommodate different lifestyles and personal commitments.
- Implement wellness programs that support work-life balance and employee health.
Amazon Case Study: Innovative Compensation Strategies
According to a report by Retail Dive, Amazon recently announced its "biggest ever investment in pay and benefits" for 800,000 workers, demonstrating innovative approaches to compensation in the retail sector:
- Hourly Pay Increase: Full-time front-line fulfillment and transportation employees received a $1.50 per hour raise, bringing the average hourly wage to over $22.
- Free Prime Membership: Hourly workers now receive a complimentary Prime membership for the duration of their employment.
- Education Benefits: Language classes are now available to workers immediately upon hiring, rather than after a 90-day waiting period.
This comprehensive approach addresses multiple aspects of employee satisfaction, including direct compensation, additional perks, and personal development opportunities.
Start Analyzing Your Compensation and Benefits Program
To ensure your compensation and benefits program remains competitive, start by defining your organization’s stance on rewarding performance, total rewards, pay transparency, and other issues.
Conduct regular reviews of your wages and benefits offerings to maintain competitiveness. This can also involve a pay equity analysis to ensure every employee is receiving fair pay for similar work.
Finally, ensure managers understand the compensation strategy and can effectively communicate it to employees. Regularly share updates about pay practices and consider providing individualized compensation statements based on employee needs and context.
By implementing these strategies, retail organizations can create a more supportive and engaging workplace that attracts and retains top talent in today's competitive landscape.
To learn more about how your organization can better manage its compensation and benefits program, don’t miss HR Retail 2025. It’s happening from April 15th to 17th at the JW Marriott LA Live in Los Angeles, California.