Tesco is in the wars over its drive to cut the pay and conditions of long-serving staff. At a time when business lobby Ibec is making forceful arguments against “draconian” new employment laws, Tesco’s move merits examination.

When it comes to supermarkets, I tend to move around a variety of stores. No chain gets all my business: better to keep them all keen.

One of the stores I know well is a Tesco. Because reporters tend to work late, I’ve often dashed there at night for milk, bread or whatever else. I’ve been there first thing in the morning too, in bag-eyed pursuit of something forgotten for the breakfast rush.

This has been going on for years. Be it in late evening, early morning or in the middle of a rainy day, I cannot think of a single occasion in which any staff member in the place was anything other than helpful, friendly and courteous. The company should be glad to have them. That’s why I keep going back.

Weakened terms

A good while ago Tesco, like other chains, introduced self-service tills. I stuck with the staff, however, the thinking being that overuse of those machines would eventually eliminate jobs. I’m useless with bar-codes and I don’t like digitised voices, but that’s not the point. You’d like to think some of your cash finds its way into the community when staff spend themselves. Machines don’t spend. They just collect.

Tesco’s move on the employment terms of staff who have served the business for two decades or more seems to be in keeping with moves in other companies on comparatively expensive “legacy contracts”.

This follows on from earlier developments as entry terms for younger workers – in the private and public sectors – were weakened. These weakened terms can in turn erode terms higher up the chain.

A strike at Tesco scheduled for Monday has been suspended, pending talks at the Workplace Relations Commission. Still, there seems to be no argument over union assertions that the firm is seeking pay cuts of 15-35 per cent, overtime cuts, cuts to Sunday and unsociable hours premiums and other measures.

The firm has made the case that the contracts in question – “inflexible and not fit for purpose” – were agreed at a time when stores didn’t open weekends and late nights. It has also proposed compensation: 2.5 times the annual loss of earnings for moving to the main contract; or voluntary redundancy paying five weeks per year of service. The redundancy offer is uncapped, an indication that potentially high costs are no barrier to the benefit the firm stands to derive from the scheme.

In a competitive world, no firm can stand still. But this must be hard to take for staff, particularly after long service. Anyone who was starting out when the relevant contracts were in vogue would now be into an expensive phase of life, when child-rearing and other costs multiply. And anyone back then who was well into working life would now be of an age in which alternative work can be pretty difficult to secure. That seems unfair, especially in light of Tesco’s recent turnaround in Ireland.

There is no doubt the firm has had a challenging time of it here since the crash, but the going was very good indeed for years. The Irish profit margin was over 9 per cent around 2008, a time when the parent group’s margin was under 6 per cent. Back then, stellar growth was a given.

Loyalty

However, momentum was lost as aggressive discounters ate into Tesco’s market share and profit margin.

Tesco has had to steady the ship, but it’s not exactly sinking. In a January trading update, the firm said its like-for-like sales performance turned positive over Christmas to 2.9 per cent “following an improving trend in sales and volume through the course of the year”.

The firm says the disputed changes were undertaken to improve “customer service at our busiest times of the week”. But it’s still not too big a stretch at all to say its move to “lower, more stable prices on hundreds of key lines” is made a lot easier with lower pay for staff who had come to expect something else in return for their loyalty and who may have no choice now but to suck it up.

I never really bought the argument that Tesco was some kind of an evil empire, but neither would I buy ultra-cheap carrots. You’d hate to think that the course of people’s lives is being upset to fund price promotions.