Should grocers keep paying their associates like heroes?

Discussion
Photo: RetailWire
May 14, 2020
Matthew Stern

Since the novel coronavirus pandemic began, low-paying frontline positions in grocery have been recognized by the public as some of the most indispensable and dangerous in the country. Many grocers praised the heroism of their workers and offered bonus pay in recognition. Now, as states, often against the federal government’s guidelines, begin to open more businesses to the public, grocers are evaluating whether to continue paying higher hourly wages and bonuses to associates.

In a significant announcement, Kroger announced it will be ending its “Hero Bonus,” a $2 hourly increase in pay instituted in April for tens of thousands of workers.

In a statement provided to RetailWire, Kroger wrote, “Our temporary Hero Bonus is scheduled to end in mid-May. In the coming months, we know that our associates’ needs will continue to evolve and change as our country recovers. Our commitment is that we will continue to listen and be responsive, empowering us to make decisions that advance the needs of our associates, customers, communities and business. We continuously evaluate employee compensation and benefits packages. Our average hourly wage is $15 and with benefits factored in, like health care, the hourly wage is over $20.”

The United Food and Commercial Workers Union (UFCW), which represents 55,000 Kroger employees, told CBS Moneywatch that given that the danger of COVID-19 still remains, so should the bonus pay.

While grocery work has arguably never been more dangerous for frontline associates, sales have been up for grocers. Year-over-year dollar sales of consumer packaged goods were up 58 percent for the week ending April 18, according to numbers by Nielsen and Rakuten appearing on Commerce 360.

Kroger, the largest operator of supermarkets in the U.S., announced a 30 percent year-over-year sales increase early in April.

Grocery prices have also increased, jumping 2.6 percent in April, the largest one-month increase since 1974, according to Labor Department statistics reported by CNBC.

While Kroger is getting rid of its bonus, Walmart has announced it will be giving its employees an additional one, according to Supermarket News. In March, Walmart gave full-time employees a $300 bonus and part-time and temporary employees a $150 bonus. The second round of bonuses will be identical and will be paid out on June 25 to people who have been with the company since at least June 5.

Amazon.com, which pays its warehouse and retail workers a minimum starting wage of $15 an hour, announced that it would extend its temporary $2 hourly pay increase and double pay for overtime policy through May 30.

RetailWire has reached out to UFCW for a statement and we will update as information becomes available.

DISCUSSION QUESTIONS: With the critical importance of the job now more broadly acknowledged, should the higher wages paid to frontline grocery workers during the pandemic become the standard moving forward? What do you make of Kroger’s move to end the bonus and do you expect most of its grocery rivals to follow its move?

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Braintrust
"Grocers can start withdrawing their 'hero bonus' when the pandemic is over. It isn’t."
"Well from a different angle, restarting the economy means encouraging and restarting spending."
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38 Comments on "Should grocers keep paying their associates like heroes?"


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Jeff Sward
BrainTrust

When the risk normalizes, the pay can be normalized. Until then, front line workers deserve some kind of premium over normal risk level working conditions.

Mohamed Amer
BrainTrust

That sums it up well! In the military, there’s hazardous duty pay when you work in extraordinary conditions, we have the same situation here.

Mark Ryski
BrainTrust

But herein lies the challenge — when will we know when it’s safe? What’s the measure? There isn’t one. With a lack of national guidelines, inadequate testing, and the real possibility that COVID-19 becomes an ongoing issue like the flu, it’s going to be very difficult for any retailer to make this call.

Mohamed Amer
BrainTrust

Absolutely Mark, it is a real challenge. Once a vaccine is available to the public, then you can mitigate the inherent risk. Short of that, the operating cost for retailers is going up and there’s no way to avoid it and having this happen with simultaneous reduction in store traffic is a double squeeze. In the interim, accessible and reliable testing will help as will taking active precautionary measures to limit spread. Customers are more likely to frequent a well-run store (read: safe) over a crowded one with no cues that shout I have healthy employees and surfaces are clean.

Joe Skorupa
BrainTrust

Mark, retailers have to make this call — difficult or not, with national guidelines or not. We may never feel as safe at work as we once did, or at least not for some time to come. So to paraphrase Mohamed Amer, “you deserve hazard pay when you work in hazardous conditions.”

Richard Hernandez
BrainTrust

I believe all retailers should keep paying their employees the extra pay a lot longer. They have been essential since day one, and they are still putting their health on the line every day they work.

Mark Ryski
BrainTrust

Has the frontline work become less hazardous? I don’t think so. Increasing wages was the right thing to do during the height of the pandemic and the companies that did increase wages were held up as exemplars of how to treat employees. However grocery/essential goods retailers operate in a low margin environment that cannot absorb a significant, across-the-board wage increase and maintain sufficient profitability. It was inevitable that these extra pay programs would come to an end, but now the optics will make this problematic. Does the reduction in pay mean that frontline workers are no longer heroes? Does it mean that the work environment is safe now? I think the answer is no to both. Kroger took the lead and I believe others will follow.

Art Suriano
Guest
It’s effortless to give something to someone but very difficult to take it away. Employees who received that additional hourly wage are not going to easily accept it being taken away, especially when the process of reopening our country is not cut and dry, and many people are still afraid of contracting the virus. Walmart did it wisely because a bonus is a one-time payment. Employees will accept it gladly, but the reward didn’t become part of the weekly paycheck. Now when employees working for grocers will see their paychecks reduced, they are not going to be happy. And the fact is, we’re still practicing some precautions to avoid the virus which varies by state, but surely grocery employees will always be in the high-risk employment category as the pandemic continues. Lastly, I have to point out the substantial price increases on products. Sure they start with the companies who sell their goods to the supermarkets, but there’s no doubt that the grocers themselves are also enjoying the opportunity to increase profits. Adjusting employees’ paychecks… Read more »
Neil Saunders
BrainTrust

It would be a nice gesture to keep wages higher. However, while sales have risen sharply for most grocers, profits have not and the higher cost of doing business has taken its toll. As much as I would like to see frontline grocery workers paid more, sound economics do need to prevail at some point. However, that point is not now when we are still in the middle of the crisis.

George Anderson
Staff

Neil – Americans have shown a willingness to pay higher prices in grocery stores as illustrated in the latest DOL numbers. Do you think there’s room for grocers to raise prices to help increase pay levels even if not to the $2 an hour level?

Looking more long-term, are there are opportunities for large chains, in particular, to remake themselves into more horizontal, responsive organizations where differences in compensation are less dramatic from the c-suite to stores?

Neil Saunders
BrainTrust

It is an interesting thought, but I don’t agree that Americans have shown a willingness. They may be paying more out of necessity and because there is less price sensitivity (among some) during a crisis. However, the major trends in grocery point to lower prices – the growth of Aldi, the continued rise of dollar stores, switching to cheaper own-brands. Our own data shows price remains of paramount importance to most grocery shoppers.

On top of this, there are shifts to online – now much accelerated – which are very margin depleting. Plus all of the investments needed in technology and stores. So, overall, I think grocery has little room for maneuvering.

The U.K. faces very similar grocery trends. Wages there were pushed up by the Living Wage legislation. The result has been a lot of staff rationalizing, unfavorable rostering changes, and reduced benefits for shop-floor staff in grocery. So higher wages came, but not without a cost.

George Anderson
Staff

Thanks

Dr. Stephen Needel
BrainTrust

From a social perspective, they, like first responders, don’t get paid nearly enough. From a capitalist perspective, with unemployment as high as it is, wages are going to decline in many places. As long as stores refuse to force mask-wearing or social distancing, (hello, Kroger) their workers need hazard pay. At places that do enforce the rules, wage supply and demand is going to take over.

And everyone watches what a Kroger or a Walmart does and follows along – some lead, most follow.

Stephen Rector
Guest

Yes, the higher wages should still remain in effect. I am not sure what Kroger was thinking in ending their bonus program as it just shines a poor light on them in the media. It feels like a PR blunder.

Suresh Chaganti
BrainTrust

So it took less than two months. I don’t know if anyone should be surprised that this has ended. But I am somewhat surprised it is ending so soon. I don’t see any less risk compared to eight weeks ago. No therapeutics yet, no vaccine. If anything the risk has been going up with reopening and some people refusing to wear masks.

But then we are a capitalist country. It’s a demand/supply equation. But decisions like these will have an impact on consumer psyche, as negative press is very likely. So Kroger and others that will follow soon should be careful.

David Naumann
BrainTrust
David Naumann
CEO and President, Cogent Creative Consulting
6 months 11 days ago

There is no doubt that grocery employees are putting themselves in a risky environment at work by interacting with the general public, as not all customers are taking the proper precautions. Giving these employees extra pay for “hazardous” duty is the right thing to do, however, it probably isn’t viable to continue the extra pay forever. The timing of when to discontinue may depend on the status of each specific state. Using a factual data-driven decision-making process may make the most sense, such as when the new COVID-19 cases drop for a number of days or reach a low threshold.

Michael Terpkosh
BrainTrust

All of us that have worked in the grocery retailing and wholesaling business know margins are very thin. However, during this time of absolute need (and big sales increases for the retailers) the higher wages should continue. These workers are risking themselves and their families by coming into work everyday to help feed America. I was surprised and somewhat shocked Kroger made this move this early in pandemic. This was a mistake, especially when you consider Walmart and others are extending the higher wages. In the end, the workers will decide where to work and they will remember and recognize with loyalty the retailers that have stood by them.

Cathy Hotka
BrainTrust

Grocers can start withdrawing their “hero bonus” when the pandemic is over. It isn’t.

Jeff Weidauer
BrainTrust

Kroger and its peers knew the pay increase was temporary, yet didn’t communicate an end date up front to manage expectations. In addition, the crisis is far from over, so removing hazard pay now raises many questions about how much these companies actually care about their frontline workers. The lack of transparency and poor communication is turning what was a PR coup into a PR disaster, and much of the good will earned has been lost. Other companies need to take note.

Ron Margulis
BrainTrust

It’s easy to sit on the sidelines and award these great workers money out of other people’s pockets, but we have to remember that even with the dramatic volume increases grocery is still a penny or two per dollar net income business. Supermarket operators are very well aware of the additional profit they’ve earned. They also know the cost for those extra earnings. If they’re transparent with their team members and reward them based on added output, the workers, shoppers and the community will be more than satisfied.

Phil Chang
BrainTrust

It has to continue. Hopefully Kroger just needs some adjustment time to catch-up to the evolving pandemic timing.

Nobody even understands all the risks yet. Having said that, it’s up to us, the “experts” and the consumers to understand that all this is going to cost us more.

Being a retailer got more expensive – cleaning, PPE, and bonuses to frontline staff are all expenses that need to get covered, without even starting to think about supply shortages and how that impacts prices.

Cynthia Holcomb
BrainTrust