Hero pay for grocery workers will soon be a thing of the past
Hero pay is quietly fading away in grocery stores and food distribution centres. In fact, U.S.-based Kroger chain, among others, even asked employees to return the extra money they received, but has since backed off. Quite the reversal from 10 weeks ago. It appears higher salaries in grocery stores were short-lived.
U.S. retailers like Target, Walmart, Whole Foods, Costco, Sprouts and Kroger implemented “hero pay” early on during the pandemic. In Canada, Sobeys, Quebec-based Metro, Vancouver-based Save-On Foods and Loblaws did the same thing. Sobeys is giving its workers “hero pay” of $50 for every employee, and $2 an hour for staff working more than 20 hours a week. Loblaws is giving all its staff an additional $2 an hour.
Most of these programs, however, will likely end in June. Some grocers like Sobeys have announced that they plan to reassess the program at some point. Calgary Co-op announced it was eliminating its COVID-19 wage stipend program for front-line employees on May 30. The idea of offering some sort of danger pay to front-line workers in the food industry is clearly losing steam.
The economics of pay increases at retail are always weak, especially in food retailing. With such low margins, these stipends were offered simply to keep enough staff around and not have operations affected by higher absenteeism rates. It worked for a while, but COVID-19 fears are slowly fading away. But so is the need to incentivize employees to show up for work. The COVID-19 fear factor is diminishing. The money will instead be spent on PPEs and other protective shields, which are likely to remain in place for a while.
The average salary in a Canadian grocery store is less than $30,000, or $15 per hour. An employee would start at around $13 an hour. The highest paid employees could earn almost $50,000 a year, tops. The “hero pay” represents a 10 per cent to 15 per cent increase in pay. Given that the average grocery store in Canada would employ about 80 fulltime employees and that payroll represents roughly 30 per cent of costs to operate, the “hero pay” essentially made the average store almost unprofitable. At the beginning of the pandemic, sales came out of nowhere, so salaries were not an issue. Now, numbers just do not make sense for the initiative to remain sustainable. The only way to make it work, of course, is to increase food prices. Food inflation could push food prices higher, but there may not be enough room for higher wages.
COVID-19 made us realize that many whose jobs are too important to shut down are the ones making the least money. And many are public-facing jobs with higher risks of contracting diseases. Mostly women, students, seniors, people who often need a second job occupy these positions. Grocery clerks and front-line workers in food distribution were considered heroes.
Also, the idea of labelling it “hero” pay was never going to end well. As businesses gets back to normal, grocers must get their expenses, including pay, back to normal as well. But normal will not be the same coming out of COVID-19. The grocery landscape will probably change, with fewer stores and fewer SKUs due to higher distribution costs. Grocers could potentially afford to pay employees more to support a different business model, one focused on analytics and omni channels. To support bold ambitions, hiring talent can only make sense, and that always comes at a cost. Ending stipends in grocery stores may be a missed opportunity. Let’s hope this does not happen across the sector.