Hay Group’s Retail Sector Report reveals increasing use of performance-related pay in the retail industry over the last year, although retailers are making bonuses more difficult to earn.
Retailers predict salary increases of just 1.9% over the coming 12 months, according to Hay Group - a figure unchanged from the same time last year, when the economy was deep in recession, while pay in the general market is predicted to rise 2.4% this year.
As a result, the current 0.5% gap between retail and general pay rise forecasts is the largest in recent years, despite most retailers performing well against targets and prevailing high inflation levels.
The research also highlights a rising trend in the use of performance-based incentives as a means to reward staff in the retail sector.
But retail staff are having to work harder in order to achieve maximum bonus payouts, with 71% of retailers requiring employee performance to ‘far exceed expectations’ – up from 59% in 2009.
Steve Paola, reward information consultant at Hay Group, said: "Despite tentative signs of economic recovery and good performance by many major retailers, employers in the sector remain cautious about the economic outlook and continue to award modest pay increases.
"Retailers are also taking a lead from other sectors in how they manage reward, using their pay budgets in a smarter way by targeting key areas and focusing on talent. We are seeing a move away from ‘one-size-fits-all’ pay increases towards a more performance-based culture.
"As is the general trend, bonuses are becoming more difficult to achieve as companies raise performance thresholds in the face of greater scrutiny from senior management.
"However, retailers are seeing the strategic benefits of a performance-based culture, and will still reward the right behaviours and results when paying out bonuses."
The report is based on pay data from 26 leading retail firms employing more than 250,000 people.
