Are inflation bonuses worth it for retailers?

Discussion
Photo: Lowe’s
Aug 22, 2022

Lowe’s is spending a total of $55 million on bonuses for hourly store associates to help them offset the sting of inflation, which has remained near 40-year highs for much of summer.

“In recognition of some of the cost pressures they are facing due to high inflation, we are providing an incremental $55 million in bonuses to our hourly front-line associates this quarter,” CEO Marvin Ellison said on the home improvement retailer’s second quarter call. “These associates have the most important jobs in our company, and we deeply appreciate everything they do to serve our customers to deliver a best-in-class experience.”

Joe McFarland, EVP, stores, said that, in addition to the bonus, Lowe’s is granting associates an additional 10 percent discount on everyday household and cleaning items for a limited time to offset inflation pressures. Mr. McFarland added, “Associates can now purchase these products at a 20 percent discount, which we hope will ease the burden of inflation impacting many of these items. We will continue to look for meaningful ways to improve our associates’ work-life balance, while providing them with the tools to build a career at Lowe’s.”

Lowe’s employs approximately 300,000 associates.

Among other retailers, Stew Leonard’s on August 15 announced its 2,500 full- and part-time associates will each receive a gift card to purchase food products at the grocer to offset inflation. A few other firms in other sectors and some municipalities are also handing out inflation-related bonuses.

Retailers have been raising wages and enhancing benefits packages to improve recruiting in a tight labor market and as minimum wage rates increase in many markets. Some have paid  employees pandemic-related hazard pay bonuses, as well.

Continual pay hikes can create a self-perpetuating cycle of runaway inflation in a feared “wage-price spiral,” but wage increases overall have not kept pace with inflation.

Over the past 12 months through July, average hourly earnings in the U.S. have increased by 5.2 percent to reach an average at private employers of $32.27. Inflation in July was up 8.5 percent from a year ago.

DISCUSSION QUESTIONS: Has inflation made retailing jobs more or less attractive to those seeking work? Will one-time bonuses, gift card handouts or limited-time discounts be effective in helping stores retain frontline workers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Inflation is a burdensome tax on every American regardless of income level. The fact that Lowe’s has done something about it for their employees is admirable."
"...in a day when most corporations seem to want to treat employees like robots, it’s good to see a retailer treat them as human."
"It depends on your perspective. One-time bonuses are easier to absorb and sit better with investors than permanent wage increases."

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15 Comments on "Are inflation bonuses worth it for retailers?"


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Jeff Weidauer
BrainTrust

For retailers to recognize that inflation is having an impact on workers is a great step, and actually providing some relief is even better. If these benefits are added to basic needs like realistic scheduling and opportunity for advancement it will help to create a more dedicated retail workforce.

Kai Clarke
BrainTrust

Yes, inflation has changed the dynamic of those seeking work. Especially the discounts and bonuses, which were not a standard just a year or two ago. We also cannot forget the rapid increase in pay that has accompanied this over the last 24 months. McDonald’s and most QSRs were paying minimum wage before COVID-19 and are now paying $15 per hour plus benefits! What is there not to like?

Gene Detroyer
BrainTrust

When the inflation rate recedes, prices do not (except for commodities). They become the base pricing for most of the products for the future.

In the short term, inflation bonuses help but are not a sustainable solution. Ultimately the solution is to raise wages to track real price increases.

Lucille DeHart
BrainTrust

Retaining top talent should be a top concern but blanket bonuses not based on merit may not achieve the desired results. I like the concept of frontline employee retention initiatives but any increase in overhead will trickle down to the consumer. Offering employees deeper discounts to retail assortments is probably a better position to take as the effort helps both the employee and the store.

David Spear
BrainTrust

Inflation is a burdensome tax on every American regardless of income level. The fact that Lowe’s has done something about it for their employees is admirable, and the net effect should be less turnover and more engaged employees.

Richard Hernandez
BrainTrust
Richard Hernandez
Merchant Director
5 months 9 days ago

Cost of living increases or bonuses are a reasonable option to keep your talent in place. I am glad to see retailers are doing something to keep their associates happy.

Mohamed Amer, PhD
BrainTrust

Inflation bonuses and other financial levers are short-term responses to the higher inflation impacting workers. These measures are welcomed and solve immediate needs. If inflation does not recede, retailers will have to ante up again, but those are necessary steps to keep and attract employees seeing their past pay increases evaporate by inflation.

Dave Bruno
BrainTrust

I admire and respect the efforts made by the retailers highlighted in Tom’s article, but am not smart enough to pass judgment on the long-term viability of these measures. I tend to think increasing employee discounts and gift cards for essentials is an easier short-term bet for most businesses, but I also think raising wages is a better long-term play for employee satisfaction, tenure and recruiting. I’ll be watching these stories closely to see how they play out in the coming months.

David Weinand
BrainTrust

It depends on your perspective. One-time bonuses are easier to absorb and sit better with investors than permanent wage increases. At the associate level, immediate gratification makes them feel valued. And I’d assume these bonuses are being doled out for those that have been employed for a minimum amount of time – so I don’t think that is an incentive for attracting new workers. Longer term, higher wages are what will retain good workers.

Shep Hyken
BrainTrust

The bonus is in lieu of a raise. The extra discount is a nice perk, as well. However the employee still sees their hourly wage as what it is, with or without the bonus. That puts the retailer at a disadvantage to retailers offering higher hourly wages. One way to offset this is to spread the bonus out over time – in other words, rather than a one-time bonus, it becomes a temporary increase in the hourly wage. This helps when inflation (hopefully) comes down and the cost of living increases return to normal.

Ryan Mathews
BrainTrust

By definition, inflation impacts all workers and employers, not just retailers. Employers offering higher wages and better benefits are obviously always better positioned to attract top talent so, in that sense, inflation doesn’t impact that dynamic. There is only one solution that will “… be effective in helping stores retain frontline workers,” and that’s offering better than market salaries, benefits, and guaranteeing a path to advancement and/or ongoing salary (not bonus) increases. One time gifts are popular, and no retail worker is going to refuse one, but given the post-COVID-19 wage raises and new inflationary pricing, they don’t do anything to address the issue of long-term disposable and savings income, which is the only way retail employees – or any employees – are going to get economically ahead. Does anyone seriously believe these inflated prices will go down after the current crisis is over? If they do, I have some nice swamp land for them that’s begging for development.

Doug Garnett
BrainTrust

Smart move by Lowe’s. Yes, these are important things to do. A bonus won’t magically fix all the impact that inflation might have but in a day when most corporations seem to want to treat employees like robots, it’s good to see a retailer treat them as human.

Patricia Vekich Waldron
Staff

I applauded Lowe’s for providing “meaningful ways” to improve associates’ experience, but bonuses and discount cards are a short-term fix.

Craig Sundstrom
Guest

What I think of this depends on whether or not the price increases are temporary or permanent; for something like gas prices, which were a spike, that makes sense, but if not — and again, people confuse price levels with inflation (a <i<changein price levels) … i.e. even if inflation goes down the prices do not — the solution is a raise.

Camille P. Schuster, PhD.
BrainTrust

Not feeling appreciated is often a complaint of low paid hourly workers. The fact that Lowes is giving workers a bonus and an increased discount is a great way to show appreciation in this economy. In another year circumstances may be different so it might be necessary to find another form of showing appreciation.

wpDiscuz
Braintrust
"Inflation is a burdensome tax on every American regardless of income level. The fact that Lowe’s has done something about it for their employees is admirable."
"...in a day when most corporations seem to want to treat employees like robots, it’s good to see a retailer treat them as human."
"It depends on your perspective. One-time bonuses are easier to absorb and sit better with investors than permanent wage increases."

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