HR & Management
Charting the increasingly unimpressive John Lewis bonus
4 min read
08 March 2018
The John Lewis bonus has now reached its lowest position since 1954, at five per cent, as “challenging” trading conditions eroded the once envy-inducing benefit.
First handed out in 1919, the John Lewis Partnership bonus paid to staff of the department store and sister company Waitrose climbed as high as 24 per cent of annual salary back in the 1980s.
Now, however, a difficult 2017 has meant staff will only receive a bonus equivalent to two weeks salary as the high street continues to struggle. In recent weeks Maplin, Toys R Us, New Look and WH Smith have all revealed disappointing sales figures alongside continued problems for the restaurant industry – where Jamie’s Italian, Carluccio’s, Prezzo and Byron Burger have all announced closures or deals for reduced rent.
The John Lewis bonus once stood as the embodiment of high street success. A business doing well enough to generously reward its “partners” in an industry that often only pays the minimum wage and is routinely inflexible.
Staff working within the John Lewis Partnership are encouraged to see the business as a place they can grow and prosper throughout their careers. This was best embodied when the company announced in 2016 that its new CEO would be Paula Nickolds, a former graduate trainee who joined John Lewis 22 years and worked her way up from the shop floor.
Nickolds is now charged with leading John Lewis through a brave new world of retail – one dominated by ecommerce and a depreciation of brand loyalty.
Speaking as part of the release of John Lewis Partnership results for the year ending 27 January, chairman Charlie Mayfield said 2017 saw “subdued demand” from consumers. Despite sales growth of two per cent, profit before the John Lewis bonus is handed out slipped by 21.9 per cent because of intensifying margins pressure in Waitrose.
“We said in January 2017 that we were preparing for tougher trading conditions with weakness in sterling feeding through into cost prices, putting pressure on margin, and much higher exceptional costs as a result of an acceleration of planned changes.
“This was why we chose to reduce the proportion of profits paid as partnership bonus last year and so as to absorb these impacts while continuing to invest in the future and in strengthening our balance sheet.”
So, how drastically has the John Lewis bonus fallen? In 1988 it hit its highest level for the third time, at 24 per cent. From the turn of the millennium onward, it has surged and dipped – topping out at 20 per cent in 2007-2008. Since 2014-15, however, it has fallen into single figures as the yearly bonus figure went from 11 per cent down through ten, six and to its current position at five per cent.
Compared with the national average, which the Office for National Statistics put at £1,600 for the year ending March 2017, John Lewis still maintains an advantage. But how long will it be before the struggles of the high street and retail in general make it impossible to award a market-leading bonus?
While financial incentives have come under fire of late, Rob Hunter spent some time working out the most suitable bonus scheme structure of his firm.