John Lewis staff brace for a life with little or no bonus | Business

While some Brexiters seem desperate for Britons to recreate the camaraderie of the second world war years, do staff toiling in John Lewis and Waitrose stores really want to be transported back to the time of rationing? This week the employee-owned company’s 83,000 staff will find out the size of their annual bonus – and they have been warned that they may need a magnifying glass to see it.

After a Christmas to forget, Sir Charlie Mayfield, chairman of the John Lewis Partnership (JLP), said times were so tough that the company would “need to consider carefully … whether payment of a bonus is prudent” – not least because of the proximity of the Brexit deadline, when the country’s retailers are braced for major disruption.

Getting their bonus – which was first paid in 1920 and is handed to all staff from shelf stackers to senior managers – is usually a belated Christmas present for staff who, lest we forget, spend December slaving on shop floors and in cavernous warehouses to satisfy the nation’s gift-buying needs. The payout has not been withheld since the postwar economic downturn of 1953, when rationing was still in place, so suspending it would suggest the company is taking a dim view of prospects in Brexit Britain.

Staff have got used to getting less cash in recent years, but would they revolt at the bonus disappearing altogether? There have already been critical letters from staff in the company’s in-house magazine, the Gazette, questioning the direction in which management is taking the group.

The staff bonus peaked at 24% of salary in the 1980s but last year it was down to just 5%, the lowest level since the 1950s. The draconian step of withholding it would strike a sour note for Mayfield to depart on; he is due to retire next year after more than a decade in charge.

But that is the emotional dimension. On a hardheaded financial basis, the company may be right to hoard cash after a tumultuous year that saw John Lewis department stores fall into the red in the first half. Not only that, but Waitrose is to break with its long-term delivery partner, Ocado, in 2020.

Nick Bubb, an independent retail analyst and seasoned JLP watcher, estimates that group pre-tax profits will be down 40% this year at just £172m and suggests a bonus of 2-3% of salary would make sense. That figure would reflect a profit recovery at Waitrose and a slump at John Lewis stores, where the figures, he says, “will not make pretty reading”.

Without question it has been one of the most volatile years in the group’s long history. High street names have fallen like dominoes, with rival House of Fraser only just surviving. Price-cutting has been rife at a time when shoppers are sitting on their hands as the Brexit row rages on.

That’s before we even get to the reasons that big shops cost more to run these days, as rising business rates, staff costs and rent costs put pressure on a business model being tested to breaking point by Britons’ obsession with online shopping.

The break with Ocado will leave a hole in the Waitrose business and its boss, Rob Collins, can expect plenty to deal with on that front. Are the 700,000 shoppers Ocado is promising to hand over to its new partner, Marks & Spencer, Waitrose diehards? Or are they fickle food shoppers happy to use the service whatever the name on the tin?

“JLP could still afford to pay a 3% bonus, which would cost circa £45m, but they have softened the partners up for nothing,” says Bubb. “It’s a very tough call, but on balance I think they will get something – say 2%.”

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