In a desperate bid to secure jobs, Pick n Pay workers have agreed to an unprecedented wage freeze during financial 2028. Allowing for inflation this means workers at the country’s second largest grocery retailer will suffer a reduction in real wages for the year beginning 1 March 2027.
This is just one of the many concessions the group’s shop stewards were forced to accept to avoid retrenchments of any of the group’s 22,000 workers. The upshot of the six-month Section 189A consultation process has completely up-ended Pick n Pay’s traditional status as a preferred employer in the grocery retail sector. Effective 1 November, Pick n Pay employees will experience employment benefits pretty much in line with those of the absolutely no-frills Shoprite.
The 13th cheque, transport costs, maternity leave, canteen facilities, workforce transferability and Sunday pay have all been gutted as management attempts to get the group back onto a growth path and stem its massive trading losses. The just-released results for the six months to end-August revealed an astonishing R1.1bn trading loss after leases.
Commenting on securing the “successful agreement” with labour, chairman James Formby and CEO Sean Summers said it “introduces a simplified and more competitive store labour model that supports more flexible and effective labour scheduling, improved cost management and a stronger long-term position for Pick n Pay’s core supermarket business.”
The one area where the trade union SACCAWU (SA Commercial Catering and Allied Workers’ Union) was able to report some success was holding onto the minimum working hours for the current full time and variable time employees. The FTEs, of which there are around 6 000, will retain their guaranteed 196 hours a month and VTEs their 130 guaranteed hours.
But anyone employed on an FTE basis from 1 November will only be guaranteed 176 hours; also, from that date new VTE’s will only get 117 hours a month guaranteed. Given the comparatively high employee turnover rate (approximately 23%) it’s inevitable that within a few years all the staff will be on the lower guaranteed hours.
Aggressive market
And in future Pick n Pay management will be able to use variable employees for 70% of their store requirements with the remaining 30% comprising FTEs. This helps to achieve the workforce flexibility management says is necessary to compete in a much more aggressive market.
What will also help is the agreement that employees can be transferred between stores to regulate and address overstaffing in identified stores. Employees will be sent to stores where vacancies or operational staffing requirements exist.
Brenita Cloete, 1st deputy president of SACCAWU told the FM that given the extremely harsh context of the situation the union was satisfied with the outcome although it does unravel 50 years of hard-fought rights. “We managed to hold onto one or two rights but the thing to remember is we were not involved in a negotiating process, Section 189A is not about negotiating — it’s about consulting.”
As Cloete explains, the Section 189A notices issued to employees on 1 May gave them a choice of two undesirable options. One was to accept retrenchment, the second was to accept a downward variation of their negotiated conditions of employment. “This means agreeing to cancel workers’ rights and protections”.
And so, whenever SACCAWU pushed back against a demand, management threatened retrenchment.
The involvement of the Minister of Labour did nothing to ease the losses suffered by the employees. Pick n Pay management stood firm against every attempt to push back.
Jean Pierre Verster of Protea Capital Management said it’s extremely difficult to be in a consultation process with someone who believes they have nothing to lose. “Pick n Pay is in such a dire situation it must feel it can’t compromise on anything” he tells the FM.
SACCAWU managed to hold onto employees’13th cheque for this year. But it was forced to accept management’s proposal that in 2027 50% of the 13th cheque payment will be a performance bonus paid to employees in stores that achieve a 5% profit margin. The other 50% will be guaranteed. However, from 2028 payment of the 13th cheque will be 100% based on performance. Cloete described this as “one of the biggest concessions made by the union.
Little upside
She told the FM what made it particularly frustrating was that, while management wanted to tie the future payment of an existing benefit to the group’s performance, it refused to consider setting up an employee share ownership plan.
“If it’s reasonable that we share the pain with shareholders then surely we should have an opportunity to share any future gains,” said Cloete. Arguably, Pick n Pay’s existential crisis is precisely due to a crisis of leadership. But, she said: “Management refused point blank to discuss it.”
Management was not able to immediately respond to queries from the FM on this issue.
Verster, however, believes that establishing an ESOP at this stage would be a shrewd business proposal. If Pick n Pay recovers, share price gains should help motivate employees.
One analyst told FM it’s likely management fears pushback from long-suffering shareholders who would be diluted by the issue of shares to an ESOP. “They could of course use treasury shares, which would make it less painful,” said the analyst. The end-August balance sheet shows the group has just over 11-million treasury shares on hand.
Other benefits to get pared back include maternity leave — the current 9 months leave with 30% pay for the first 7 months and 75% for months eight and nine was reduced to four months paid at 34% and an additional two months of unpaid leave; the company will no longer provide cooked subsidized meals at stores but will continue to provide free tea, coffee, bread and spreads; work on Sunday will be paid at 1.5 times ordinary hours instead of two times.
