Carrot or stick? For Aldi and Lidl, equal pay goes hand in hand with commercial success

Kevin the Carrot, who once again features in Aldi’s Christmas advert, is proving a bigger hit with shoppers than even Elton John, star of the John Lewis ad.

Soft-toy versions of the animated vegetable sold out at 4am on the day of release in some areas and have reportedly provoked fights among customers desperate to get their hands on him.

So the carrot approach certainly works for Aldi – and not just on cuddly toys. It applies to the issue of equal pay too.

While Britain’s four leading supermarkets currently face legal challenges from thousands of workers over pay discrimination (including one in which my own firm acts for the claimants), you won’t find anyone making the same charges against Aldi or its compatriot Lidl.

Why not? Because the German-owned discount chains don’t commercially undervalue the work carried out by women in stores.

Not only is their policy right, it makes sound business sense too.

When it comes to publishing pay rates, Aldi and Lidl are, interestingly, the most transparent. Their current core hourly rates for store workers and distribution workers range from £8.75 to £11.79.

Aldi store workers outside London can earn 10p per hour more than distribution workers, who themselves can earn 90p per hour more in the capital. At Lidl, the range of rates for both groups of workers is identical.

Compare this to Tesco, which has more opaque pay arrangements. There appears to be a wage gap of up to £3 per hour between store workers and their better-paid distribution centre colleagues. The other big three supermarkets have a similarly large pay divide.

Tesco says that the jobs of store and distribution workers can’t be compared, but that in any event there is a range of factors to blame for the gap, including arrangements for determining pay and differences in the market for labour.

But neither Aldi nor Lidl seem to have a problem recruiting or retaining staff – quite the opposite. That is just as well given their current phenomenal rates of growth.

According to Barbour ABI, the discounters opened a combined 123 stores in the past year. How many did the biggest three supermarkets open between them? Just 10.

In fact, the two discounters are growing so fast that their combined share of the grocery market is predicted to eclipse Asda and Sainsbury’s by 2021.

Kantar Worldpanel’s latest data shows Aldi and Lidl increasing sales by 15 and 10 per cent respectively, both gaining market share, with Tesco, Sainsbury’s and Asda all losing ground.

In this difficult climate, one might think that the big four supermarkets would be piling all their efforts into challenging their upstart rivals and recapturing the hearts and minds of their customers.

Instead, they seem intent on trying to justify unfair and outdated pay arrangements through an expensive legal process which could take years to resolve.

Meanwhile, Aldi and Lidl continue to expand stores and create jobs around the country, increasing sales and profits as they march on. As the discount duo are proving, the carrot beats the stick every time.

Emily Fernando is a solicitor at Harcus Sinclair UK Limited, which is currently bringing an equal pay claim with campaigning group Pay Justice on behalf of store workers at Tesco. For more information visit: www.equalpayaction.com