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Streamlining During a Tough Economy

Streamlining During a Tough Economy
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Managing Director

Businesses must constantly monitor, analyse, and adapt, particularly during challenging times to survive. When streamlining involves cutting pay supplements, rearranging internal roles, and closing down aspects of the business, things become even tougher, as ASDA is finding out. 

A tough economy is tough for employees and employers alike. Such times often force difficult decisions on employers as they strive to remain afloat and competitive. Mergers also often bring about changes and when mergers and tough economic times converge, we have a perfect storm.

Such an occasion has arisen with ASDA, who, the GMB union has warned, has threatened around seven thousand workers with a 'fire and rehire' threat following their intention to remove the 60 pence per hour ‘location supplement’. In addition, management has announced it will be changing overnight shifts in 184 smaller superstores to reduce the number of staff working at the overnight supplemented rate, which could mean 211 night-shift manager roles will be eliminated. Several other roles also face the axe as ASDA has announced intentions to close some in-store pharmacies and Post Office branches and a 22% reduction in worker hours for the remaining Post Office branches. Workers who refuse to sign the new contract, due to come into force across the south of England in November, could be dismissed.

ASDA has launched a consultation to explore whether the supplements are appropriate for workers at 39 stores outside of the M25, which have historically received a higher pay rate due to their proximity to London. ASDA say they are the only supermarket that pays a supplement of this type, and the owners are looking to make savings for the organisation's sustainability. As part of the consultation process, they are proposing a compensatory payment, but whilst this is being discussed, no conclusion has been reached and the consultation continues.

It appears these cuts are part of the legacy of the purchase from Walmart, which sold a majority stake in ASDA to a consortium of the Issa brothers and private equity firm TDR Capital on a debt-free, cash-free basis. The consortium is now seeking to restructure ASDA to push through a merger of ASDA with EG Group’s UK division, which the Issa brothers own, as they try to reduce EG Group’s £ 7 billion debt burden, which, when taken with ASDA’s purchase funding, brings the debt to around £11bn. With sharply rising interest rates and the supermarket losing ground to rivals, particularly Aldi, the future for ASDA and its employees looks precarious. This is a significant concern as one of the largest private sector employers in the UK, with around 140,000 employees.

So, there are two sides to this story. Clearly, the cuts to supplements to workers in the South are being made, at least in part, to make ASDA more robust. If the supermarket fails, 100,000 people will lose their jobs. The reality for the employees, especially being on the lower end of the pay scale, is that cutting such a significant chunk off a pay cheque will cause very real problems.

In addition to the hardship the supplement cuts will foist on workers, such cuts send a message that employees are not valued, not respected and are infinitely replaceable. The knock-on effect of this cannot be underestimated. Resignations, low morale, and declining productivity will all impact the stores’ ability to provide a satisfactory service to consumers. Presumably, disgruntled staff and customers will both defect to rival supermarkets. It’s a far cry from their status as ‘key workers’ during the pandemic when they achieved near-celebrity status. 

Effectively reducing pay, which removal of these supplements amounts to, is never going to be a popular move, even less so when staff are dealing with the cost-of-living crisis. It highlights the importance of employee engagement and how, for a satisfactory outcome, the process must be handled with sensitivity.

It’s not only global corporations facing these types of decisions; small and medium-sized companies are also facing them. Smaller businesses may not have the scope of expertise to manage critical negotiations around consultations and this is where an outsourced HR consultancy can be invaluable. Businesses must constantly evaluate performance and streamline processes to survive; the key is to do it in a way that doesn’t leave your reputation in tatters, so when you need to recruit, people still want to work for you.

ASL Recruitment was established in 1999 and has served Hastings and the surrounding area ever since, placing temporary and permanent roles across various sectors, including Industrial and Manufacturing, Legal, Finance, Marketing, Technology and Office Support, from junior to board level. Our co-founder and Managing Director, Jason Perry , is an HR specialist and a Chartered Fellow of the Chartered Institute of Personnel and Development.