John Lewis cuts bonus to lowest level in decades

John Lewis and Waitrose staff will receive a bonus of just 2% in 2020, which is their lowest payout in 67 years

The retailer announced it made a profit of £123 million in 2019/20, which is 23% less than it made in 2018/19.

The company’s fall in profits has contributed not only to the cut in the annual bonus, but to the closure of three Waitrose stores.

Waitrose branches in Helensburgh in Scotland, Four Oaks in Sutton Coldfield and Waterlooville in Hampshire are all to close in late 2020, putting around 400 jobs at risk.

“Despite a solid performance in Waitrose it is our third year of declining profit across the Partnership as a whole,” new company chairwoman Sharon White said in a statement.

“This year we saw a one-off reduction in the value of our John Lewis shops to £123 million, principally as a result of shops playing less of a role in driving online purchases.”

In the statement White added: “I believe this [bonus cut] is prudent and affordable and it recognises the contribution made by partners working in the business today without creating risk for our future sustainability.”

The John Lewis Partnership is the UK’s largest employee-owned business. It treats employees as partners, which means that because they have shares they receive a portion of the profits by way of a yearly bonus payment. All workers receive the same payout, regardless of seniority.

Head of benefits strategy at Howden Employee Benefits, Steve Herbert told HR magazine that this ‘partnership’ model has to work in both good times and bad.

“When things are not going well – which is the case for much of the UK’s high-street retail sector currently – then the partners should expect and be prepared to receive little or no bonus payments,” he said.

The bonus cut will inevitably do some damage to goodwill and worker engagement, Herbert highlighted.

“The key must be for John Lewis to manage the messaging well and ensure that as many partners as possible understand the challenges ahead and are committed to turning the business around as a group.

“The company might also do well to consider if a partnership model heavily reliant on annual bonus is the right way to incentivise workers, particularly given the difficult trading environment for retailers in the years immediately ahead,” he suggested.

White has said the John Lewis Partnership will undertake a strategic review of operations to see where savings can be made and opportunities for growth. It will be published in Autumn this year.