The rising cost of casual workers in retail

For years, flexible employment models like zero-hour contracts and part-time work have been a staple in the retail industry. However, recent legislative changes and rising employer costs are reshaping the world of work.

With the latest changes and added pressures, retailers must shift their workforce strategy towards flexibility, investing in multi-skilled employees who can adapt to their needs.

Retail has long relied on part-time and zero-hour contracts to provide agility, keeping you in control of staff costs variables and reactive to the demands of your business. But from April 2025, these methods are going to be more expensive. So what's changing?

Increased wage and employer costs

• National Minimum Wage (NMW): The UK National Minimum wage has increased to £12.21 per hour for ages 21 and over, increasing payroll costs across the board
• National Insurance Contributions (NICs): National Insurance Contributions have risen to 15%, while the threshold for employer contributions has dropped from £9,100 to £5,000, impacting costs for businesses with lower-paid, part-time workers
• Increased burden: UK retailers are expected to see a spending rise of £7 billion in 2025, with £2.33bn attributed to NICs and £2.73bn due to NMW increases

Legal changes to zero-hours and part-time work

• Minimum-hour contracts: The UK government is set to introduce the right to guaranteed hours, with retailers required to offer zero-hours workers a contract based on the number of hours they work over a set reference period
• Cancelled shifts: Compensation could be introduced for cancelled shifts, increasing financial liability for unpredictable scheduling
• Immediate impact: Day one employment rights will add new compliance and administrative costs for onboarding part-time and casual workers

Erosion of economies of scale for part-time staff

• Increased costs: Outgoings such as recruitment, training, uniforms, and administrative overheads are spread over fewer hours for part-time workers, increasing their cost per hour worked
• More rigid: Store managers will have less scheduling flexibility, leading to inefficient staffing and higher costs due to overstaffing or idle hours

A recent survey by the British Retail Consortium (BRC) reveals that over half of retailers (52%) intend to cut head office workers, and 46% plan to reduce store workers due to rising employer costs. The survey also shows growing concern among retail finance chiefs, with 70% feeling pessimistic about the year ahead. Their main worries include declining consumer demand, rising inflation, and increasing tax and regulatory pressures.

To deal with higher costs, such as the rise in National Insurance and the new minimum wage, 67% of CFOs plan to increase prices. However, with shoppers already feeling the strain, raising prices could further harm sales. To remain profitable, retailers need to shift from quick cost-cutting fixes to more strategic and effective ways of managing their workforce.

The shift from contractual to workforce flexibility

With these changes, profitability will require a new approach to workforce strategy. Retailers can no longer rely on part-time or casual contracts. Instead, they need to build flexibility into their workforce by developing their talent.

Thankfully, there are a lot of different methods you can use to help. Which one is best for your business will depend on your current circumstances and where you anticipate going. It's vital to set your organisation and your team concrete, actionable goals. This will provide a framework from which you can build out the rest of your strategy.

How retailers can adapt

Multi-skilling and cross-training

• Retailers must invest in multi-skilled employees who can work across different areas, such as store operations, fulfilment, and distribution
• Cross-training reduces dependency on part-time staff, allowing retailers to scale labour dynamically without increasing headcount

People analytics and workforce planning

• Retailers need real-time visibility into workforce data to understand labour cost composition and restructure roles accordingly
• Data-driven workforce strategies can help balance full-time, part-time, and automation investments to optimise cost efficiency

Stronger career pathways and retention strategies

• Retention is critical - a retailer with 6,000 employees losing 50 workers per week spends over £9.6 million per year in turnover-related costs
• Investing in career progression, financial wellbeing tools, and employee engagement initiatives can reduce churn and lower recruitment costs

Futureproofing retail workforces

Agility in retail will no longer come from contracts. It will come from capability.

With fewer cost advantages in part-time staffing, retailers will need to rethink their approach to workforce agility—using technology, skills development, and more thoughtful workforce planning to their advantage.

If you want to be part of the conversation on how HR, payroll, and workforce management software can help your business stay ahead, download our latest guide for retailers. It’s built specifically for businesses just like yours to help futureproof you against a shifting workplace dynamic.