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In Retail, the Salary Crunch Begins
Imagine it’s the summer of 2021, and leaders from a highly competitive industry are figuring what to do about salaries in order to retain talent in a market full of shortages and people quitting. Naturally, there will be raises, and those raises will end up being high.
But as of the summer of 2022, only 6% of retailers plan to offer any raises or bonuses come fall, according to new research from Korn Ferry. It’s the latest, if not the strongest indication of the degree to which industries are tightening their belts in the face of a looming recession and spiraling inflation. Experts say that retail-chain owners have done the calculus: consumers—who are paying thousands of dollars more for gas and food—will have to pull back on discretionary spending this fall.
Still, tightening salaries so much is not without its risks. “It’s still a fairly active talent market—other companies are actively recruiting, so the risk is that employees are vulnerable to those recruiting efforts, and you lose them,” says Cory Morrow, leader of Korn Ferry’s Consumer and Retail practice for executive pay and governance.
Some retailers do plan to reward their workers. Thirteen percent say they will add raises in 2023; another 18% say they will provide raises to individuals or functions only as needed. But these companies are in the minority, and they’re walking a fine line: most plan to staff seasonal workers at the same rates as last year, while also grappling with large inventories of unsold, highly discounted products that customers do not want. With that in mind, the retailers are capping merit raises at 3% to 4%, according to the survey—despite an inflation rate over 9%. “They're taking a strong look at expenses and keeping their powder dry,” says Craig Rowley, senior client partner in the Retail practice at Korn Ferry.
This creates a difficult situation for low-wage workers, who experts say will probably have to take on extra jobs to close the gap between their incomes and rising inflation. The survey indicates that such jobs are likely available in retail: 74% of retailers are hiring for new positions, and 44% say that they are still struggling with high levels of turnover. “That jumped out at me,” says John Long, North America retail sector leader in Korn Ferry’s Retail and Consumer practices. “Hiring is still a problem that hasn’t stopped.” He says that in recent months retailers have continued to use signing bonuses to attract workers.
Morrow suggests that retailers take measures to retain talent. “Certain individuals or critical roles need to be compensated appropriately, given the volatility,” he says. But overall, the mood is trending upward, he says: “It’s cautiously optimistic.”