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Optimizing labour costs in distribution

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Press Releases
November 13, 2018

Optimizing labour costs in distribution:

  • annual profit of more than 200 euro per employee
  • increased operational margin

Brussels, xx November 2018. The Belgian distribution sector has a serious handicap compared with its direct competitors, but there is great potential for improvement. According to a recent study by Ayming Belgium, a business performance-enhancing consulting group, optimization of social security and taxation of wages will generate unexpected profit in the retail trade.

In terms of labour costs, the Belgian retail players have a competitive handicap of 3.8% to 6,6% (excl. VAT) compared with their Dutch sector colleagues. In October 2018 Ayming Belgium conducted a survey comparing the social contributions and taxes on wages in the Belgian distribution sector and the manufacturing industry, and exploring the possible economies that might be achieved through optimization mechanisms[1].

 More than 200 euro savings per employee

Having no R&D personnel the retail sector has a much greater potential for the optimization of social and fiscal charges on wages than does industry: based on the figures for 2017 Ayming Belgium’s consultants estimate the possible savings at an average of 206.22 euro per employee as against “only” 125.88 euro for industry.

There are two main reasons for this yawning gap. “In the first place, the level of qualification of employees: the distribution sector often employs lower-skilled workers than does industry, which allows distribution to apply for bigger reductions of the employer’s contributions for the “target group”. As the name would indicate, these reductions concern target groups of employees such as, for example, young low-skilled workers. Secondly, the retail trade has a higher turnover of personnel in contact with clients than does industry. These two reasons together mean that the frequency of eligibility for aid is higher in the distribution sector than it is in manufacturing”, explains Laurie Pilo, Managing Director of Ayming Belgium.

However, making use of regional exemptions is no easy matter. If an enterprise is active in the three regions of Belgium it must spend a fair amount of time on its HR department with personnel recruitment and management of numerous mechanisms, with possible errors in coding and interpretation if the data transmission chain does not run sufficiently smooth between the sales outlet and the Payroll department. “The support in the execution of these complex measures makes it possible to use these regional stimulants to best effect and to avoid hidden administrative costs”, says Laurie Pilo. The result: an improvement of the operational margins, particularly under pressure in the retail sector. According to the study by Ayming Belgium, the potential savings on the annual wage can be as much as 0.40% in distribution, as against 0.17% in manufacturing; this has a direct impact on the operational result.

Two more challenges: digitization and competitive capacity of the sales outlet

In 2018 online purchases in Belgium were expected to crest the 12 thousand million euro mark. The widespread use of e-commerce is a big challenge for traditional retailers. The investments that must be made towards the development of the webshop and the control of the delivery chain are appreciable. For example, did you know that 4% of turnover ends up lost each year because articles are sold out? New technologies (Big Data, artificial intelligence, biometric authentication, augmented reality, etc.). These projects make it possible to apply for government subsidies for job creation and innovation. So, what’s there to gain? Transforming the challenge of digitization into a competitive advantage!

One of the dominant trends in retail is the phygital which, as far as concerns the retail trader, consists of the development of a complementarity between digital channels and physical sales outlets. This strategy requires a mutation of the sales outlets, responsible as they are for improvement of the client experience. At the moment more than half of consumers in the Benelux combine online and in-store shopping, the former accounting for an average of 20% of total purchases. An enterprise wishing to make its sales outlets more attractive will now have to think seriously about training and retaining its personnel, and also about making working hours more flexible. An audit of all dimensions of an installation project will make it possible to optimize the available supports mechanisms, such as, for example, the partial exemption.

“By making use of all these mechanisms the profits can be really impressive. For just one of our clients, a big retailer, the realized savings were 328 400 euro”, says Laurie Pilo.

About Ayming

Ayming is an international business performance consulting group operating in four areas of expertise: human resources, operations (purchases, supply chain, etc.), finances and innovation. Ayming is present in 16 countries throughout Europe, North America and Asia. For fifteen years now Ayming Belgium has been active in the anticipation, acceleration and securing of the operational performance of more than 400 enterprises in Belgium. It has numerous clients in the distribution sector.

[1] This survey is based on the analysis of 94 594 payslips (2017) from clients of Ayming and their subsidiaries in distribution and the manufacturing industry.

 

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