AI-driven workforce automation is retail’s best defence as businesses look to lessen the budget of labour tax rises and spiralling wage costs, says Eoin Houlihan, Vice President of Europe at Legion Technologies. Rather than turning towards shorter-term price rises – universally unpopular with customers – and job cuts that risk leaving talent and resource gaps, he argues intelligent workforce automation provides a longer-term solution, focusing on productivity. Here he outlines three essential considerations for retail operations management.
With rising National Insurance Contributions (NICs) squeezing both employers and employees, financial strain on UK retailers is at an all-time high. Businesses must find efficiency gains without resorting to lay-offs or sacrificing employee satisfaction. Fortunately, AI-powered workforce automation presents an opportunity to optimise shift coverage, reduce unnecessary overtime and implement Earned Wage Access (EWA) programmes, all without increasing operational costs.
The latest policy changes introduced by Chancellor, Rachel Reeves, have exacerbated financial pressures on retailers. The reduction of the employer NIC threshold from £9,100 to £5,000 means businesses will now pay additional tax on a larger proportion of their workforce, while the rate for employer NICs will rise from 13.8% to 15%. Combined with rising National Living Wage (NLW) costs and other regulatory shifts, these measures are forcing many retailers to cut jobs, reduce hiring and limit pay increases.
With NICs and NLW increases alone set to add an estimated £5billion to retail’s wage bill this year, retailers are, understandably, trying to lessen the burden of rising labour costs on their businesses. But price hikes and headcount cuts might not be the answer; raising prices risks alienating inflation-weary, price-conscious consumers, while cutting frontline staff threatens customer service and risks lost sales. Instead, AI offers a viable – but so far untapped – alternative lever, where improved productivity and staff engagement mitigate wage tax challenges, making investment in technology to boost labour efficiency and retention imperative.
The workforce turnover crisis
Retailers’ labour challenges come at a time when the retail workforce is already experiencing a turnover crisis, delivering a double blow to retail businesses already under strain.
Our latest research in The 2025 State of the UK Hourly Workforce Report paints a worrying picture for retail employers – 63% of hourly employees plan to leave their jobs within the next 12 months. Among 18-24-year-olds, staff turnover jumps to 79%. Meanwhile, 68% of those leaving intend to exit the industry entirely, reducing the available talent pool. Over half (51%) of employers cite inflexible scheduling as a major retention challenge while a further 52% of managers lack time for coaching, team development and customer service due to administrative overload.
Retailers cannot afford to ignore these statistics. If turnover remains high and recruitment costs escalate, businesses will find it even harder to survive the mounting economic pressures. AI-driven workforce automation can help and is part of a trend in retail to adopt AI. According to ProfileTree, by 2024, 45% of UK SMEs had integrated at least one AI-based solution, an increase from 25% in 2022. Among medium-sized enterprises (50– 249 employees), 65% have implemented AI in at least one department.
AI-driven workforce automation provides retailers with a viable solution to these challenges by optimising scheduling, improving efficiency and enhancing employee satisfaction.
1. AI-powered scheduling reduces costs and boost productivity
Automated scheduling tools can help retailers optimise labour allocation by ensuring the right employees are scheduled at the right times. AI can reduce scheduling conflicts and last-minute shift gaps; ensure top performers are assigned to peak hours, maximising sales potential; provide employees with self-service shift swapping and flexible scheduling options; and cut down on unnecessary overtime and reduce payroll expenses. 65% of managers agree that AI could make scheduling easier, yet 42% still rely on outdated paper and spreadsheet scheduling methods.
2. Automation improves manager efficiency
Retail managers are overwhelmed by administrative burdens, spending excessive time on scheduling, payroll, and compliance tracking. By automating these tasks, businesses can free up managers to focus on more valuable activities such as employee engagement and customer service. 65% of managers spend 3+ hours per week on scheduling alone; 52% spend the same amount of time managing time and attendance records; 46% still manually call, text, or email employees to fill last-minute shifts. By replacing these outdated processes with AI-driven tools, retailers can reduce inefficiencies and improve operational agility.
3. Earned Wage Access (EWA) enhances employee satisfaction
One of the biggest financial stresses for hourly workers is cash flow fluctuations. AI-powered EWA programmes allow employees to access a portion of their earned wages before payday, reducing financial insecurity and improving job satisfaction.
30% of workers rank EWA as a top benefit that would improve their work experience; 40% of Gen Z employees prioritise EWA, reflecting their need for financial flexibility. And yet, only 8.9% of employers currently offer this benefit, highlighting a significant gap between employee needs and employer offerings.
Employers who fail to act risk facing ongoing workforce instability. The demand for better working conditions, increased flexibility, and financial wellness benefits is growing. Retailers that continue to rely on manual processes and outdated workforce management methods will struggle to attract and retain top talent.
With rising NICs and economic uncertainty, UK retailers must adopt AI-driven workforce automation to remain competitive. By reducing inefficiencies, improving scheduling and enhancing employee wellbeing, businesses can protect their bottom line and foster a more engaged and stable workforce. By investing in modern workforce management technology, organisations can move beyond short-term cost-cutting and unlock smarter, more sustainable ways to boost both efficiency and employee satisfaction – a necessary step towards long-term sustainability in an ever-changing retail market.
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