John Lewis: why is company reinstating staff bonus in 2022 amid cost of living crisis - and how much is it?

The John Lewis Partnership has announced it will reinstate staff bonuses amid the UK’s cost of living crisis.

The company, which owns John Lewis department stores and Waitrose supermarkets in the UK, scrapped staff bonuses last year for the first time since 1953 due to the Covid-19 pandemic.

Additionally, the company has promised to pay the voluntary living wage, alongside a wider staff pay rise.

This is what you need to know.

Why has John Lewis reinstated its bonus scheme?

John Lewis has reinstated its staff bonus, and has agreed to give staff the voluntary Real Living Wage as well as a wider pay rise in the face of the UK’s cost of living crisis.

In a statement, partner and chairman Sharon White said: “With our Partners, like the whole country, facing a cost of living squeeze, we believe that this is the right time to pay the voluntary Real Living Wage, nationwide. In addition, this year’s pay review has been set at 2%.”

White also said John Lewis’s reduced annual losses was another reason for the changes, and added that the company’s executives would donate their bonuses to charity.

She said “John Lewis achieved the highest sales in its history, £4.9bn, (for the year ended 29 January 2022).”

The company reported a bottom line loss before tax of £26m - an improvement of £491m on 2020 when it launched a vast plan to save costs.

This led to the closure of eight John Lewis shops and a delivery hub, and the loss of over 1,000 jobs.

White said these closures were “difficult” but “necessary”.

The improved losses, which includes the impact of the axed bonuses, was on the back of a 38% rise in underlying pre-tax profits to £181m.

During the 12 months ending 29 January 2022, John Lewis’s store sales were up 8% on a like-for-like basis for the previous 12 months, while Waitrose stores saw a 1% increase in sales when compared to the previous year.

How much is the bonus and the wage increase?

John Lewis staff will receive an annual bonus of 3% of their salaries to the value of £46m, as well as a 2% pay rise which amounts to an additional £54m.

Staff will also receive the voluntary Real Living Wage, which is a rate of pay independently calculated against the cost of living and rising costs, including rent, fuel, energy and food.

The rate is £11.05 an hour in London and £9.90 per hour in the rest of the UK.

Will there be any benefits for customers?

The company has announced that customers will benefit from an improved MyJL loyalty scheme, which is coming later this year.

Waitrose shoppers can also expect a revamped MyWaitrose loyalty scheme, as well as savings on products they buy the most.

However, White also warned of “uncertainties” due to the war in Ukraine and rising inflation, with prices having to increase in some areas.

She told the PA news agency: “As far as we can, we’re trying to absorb the cost pressures… not all of these pressures are absorbable.”

“The cost of living pressures are real – real for our partners and customers and we’re doing everything we can in our power to try to limit the impact.”

This also comes after the firm announced last month that it would drop its "Never Knowingly Undersold" promise to customers this summer as part of a new focus on its Anyday value ranges.