The End of ‘Hero Pay’ for Grocery Workers in Canada an Operational Necessity: Expert

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The “hero pay” is quietly fading away in grocery stores and food distribution centers. In fact, the American-based Kroger chain, among others, even asked employees to return the extra money they received but has since backed off. Quite the reversal from 10 weeks ago. It appears higher salaries in grocery stores were short-lived. It is not overly surprising, given the high-volume, low-margin nature of the business, but it will likely create a rift between employees and companies.

American retailers like Target, Walmart, Whole Foods, Costco, Sprouts, and Kroger implemented “hero pay” early on during the pandemic. In Canada, Sobeys, Quebec-based Metro, Vancouver-based Save-On Foods, and Loblaws did the same thing. Sobeys is giving its workers “hero pay” of $50 for every employee, and $2 an hour for staff working more than 20 hours a week. Loblaws is giving all its staff an additional $2 an hour.

Most of these programs, however, will likely end in May or June. Some grocers like Sobeys have announced that they plan to reassess the program at some point. Calgary Co-op announced it was eliminating its COVID-19 wage stipend program for front-line employees on May 30. More than a dozen grocers in the United States have announced that they will not be renewing their pledge to workers either. The idea of offering some sort of danger pay to front-line workers in the food industry is clearly losing steam. Chances are these stipends will not survive the summer, and perhaps not even the possible second COVID-19 wave.

The economics of pay increases at retail are always weak, especially in food retailing. With such low margins, these stipends were offered simply to keep enough staff around and not have operations affected by higher absenteeism rates. It worked for a while, but COVID-19 fears are slowly fading away. But so is the need to incentivize employees to show up for work. The COVID-19 fear factor is diminishing. The money will instead be spent on PPEs and other protective shields, which are likely to remain in place for a while. This seems to be where things are going. Disappointing for employees, but not surprising.

The average salary in a Canadian grocery store is less than $30,000 or $15 per hour. An employee would start at around $13 an hour. The highest paid employees could earn almost $50,000 a year, tops. The “hero pay” represents a 10% to 15% increase in pay. Given that the average grocery store in Canada would employ about 80 full-time employees and that payroll represents roughly 30% of costs to operate, the “hero pay” essentially made the average store almost unprofitable.

At the beginning of the pandemic, sales came out of nowhere, so salaries were not an issue. Now, numbers just do not make sense for the initiative to remain sustainable. The only way to make it work, of course, is to increase food prices. Food inflation could push food prices higher for a while, but there may not be enough room for higher wages. Grocers also need to think about e-commerce as we maneuver thought the COVID era. That will bring its own load of extra costs as well.

COVID-19 made us realize that many whose jobs are too important to shut down are the ones making the least money. And many are public-facing jobs with higher risks of contracting diseases. Mostly women, students, seniors, people who often need a second job occupy these positions. For the first time ever, grocery clerks and front-line workers in food distribution were considered heroes and were praised constantly. Higher wages over time would have redefined many of these roles and would have allowed grocers to attract a different crop of talent, not just those simply looking for a job.

Also, the idea of labelling it “hero” pay was never going to end well. As businesses gets back to normal, grocers must get their expenses, including pay, back to normal as well. But normal will not be the same coming out of COVID-19. The grocery landscape will probably change, with fewer stores and fewer SKUs due to higher distribution costs. Grocers could potentially afford to pay employees more to support a different business model, one focused on analytics and omni channels.

To support bold ambitions, hiring talent can only make sense, and that always comes at a cost. Ending stipends in grocery stores may be a missed opportunity. Let’s hope this does not happen across the sector.

12 COMMENTS

  1. Just curious about where you are getting your info on the number of full time employees in grocery stores. In my 30 + years in the grocery industry there have been a max of 35 full time staff including managment in any af the 20+ stores I have worked in.

  2. I too would like to know where you got the information…..starting/hiring wage is $11.80 per hour. An exciting 10 cents above min wage but a far cry from $13!!

  3. Hi…..Not sure where you got your information concerning pay….hiring/starting wage is 11.80 per hour….just 10 cents above our min wage. That is a far cry from the 13.00 you have indicated.

  4. Besides actually (sincerely and cheerfully please!) telling grocery store workers that we are thankful that they are there for us ( so we can obtain our groceries)..perhaps we/they need a ‘tip’ jar, some way to express our appreciation and augument their take home pay if employers/ government cannot ensure a living wage for these essential workers.
    We tip servers for booze. Or restaurant food & take out but, not for fresh/ food store food..? What?

    • My employer policy is that employees cannot receive gifts or tips of any kind. If someone leaves a greeting card with a gift card inside, we’re supposed to give it to our manager. Allowing tips would supposedly give incentive for unethical behaviour, not better service, is their theory.

  5. I worked for Canada Safeway in the 90’s and made over $20/hour as a non full-time status employee. It was a livable wage at the time and Safeway was doing well. It was no hardship to pay their employees a good wage. Grocery stores may have low margins but because of the high volume they still post healthy profits. People still have to eat and that will never go out of vogue. There is no excuse for taking advantage of people and paying such low wages.
    The only reason Safeway stopped paying a livable wage to employees in the 90’s is because The Real Canadian Superstore moved into town with rock bottom wages and Safeway chose to compete with them.
    It’s time all the major retail chains took a stand together for their employees by paying a decent wage once again. The shareholders might not be happy about it but if these unprecedented times have taught us anything it’s that every person matters. It’s more important that every person has access to a livable income, healthcare and education than posting year over year profit increases for a few privileged investors.

  6. My employer is a major US based big box grocery retailer in Ontario. Not only are most employees part time, hours for some are so staggered it makes it impossible to have a second job. They can even schedule you to come in 11 hours after your previous shift ended. Some weeks we only get 12 hours. It makes a home routine and a living income impossible. They even say if you do get a second job, your first job takes priority. They pay lip service about caring for the welfare of employees. They tell the public health n printed ads they’re doing certain cleaning, etc protocols but it’s not happening in reality. Still no hand sanitizer at entrance. Rest of year grocery register belts are "cleaned" with water if you can find cloths or paper towels. I feel disposable, not valued

  7. An interesting take on things and certainly slanted towards retailers. Has the author taken into consideration the record profits grocery retailers enjoyed during the first 5 months of the year? With the food service sector all but shut down, retailers reaped huge increases in volume. Additionally, with so many people "hoarding", retailers found it difficult to keep shelves stocked.

    I think I might challenge his assertion that stores were unprofitable because they threw their employees a bone. In fact, I might suggest they were giddy with the opportunity to garner so much community good will by being seen as almost saintly for a measly $2 an hour.

    It may be that corporate bean counters are simply looking to squeeze a few extra dollars for share holders.

  8. @Karen In Ontario minimum wage is $14 (there was to be an increase to $15 but Rob Ford squashed it). I worked for 7 years in a large box hardware store and my last hourly rate April 2020 was $14.35. While I was somewhat happy with my hiring wage I was not happy when the minimum increased and my wage did not increase with the equivalent. Prior to that, while my son was young I worked for myself and charged $15 an hour for cleaning, gardening, dog walking etc.
    In 2020, even $15 is not a livable wage. Unfortunately, stores are not going to reduce their profits so employees can be fairly paid, they will raise their prices. Raising their prices keeps me from being able to buy outside of the flyer sales and the circle just continues.

  9. I find it interesting that you glaze over the fact that prices at grocery stores have gone up on almost everything and will stay that way. I buy pork loins for $3.94/kg and sell them at $13.87/kg and use frozen food and processed meats to give me even better margins than that. In four months my store has exceeded their projections for the year and almost every store in the company has as well. I am still way above where I should be in sales, last year I sold 50k for the week and this year I’m doing 70k. Maybe if $2 an hour isn’t reasonable then massive returns to shareholders shouldn’t be either.

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