Good employment practices pay off at Mercadona

Mercadona, a national supermarket chain in Spain, is a standout, paying employees 27 percent more than the minimum wage. This increases to 72 percent for those with at least four years of experience.

Mercadona’s flexible working hours, Sundays off as well an annual profit sharing program are among the many workplace policies which have helped it to become the best-ranked Spanish grocery chain in the Financial Times/Statista ranking of Europe’s top employers.

Jaime de Nardiz is the director of culture transformation and innovation for Great Place to Work Spain. He says that in Spain, supermarkets open at 8am-9am and close by 9pm-10pm. “It’s an extremely long day,” he notes. “And it’s not like an office job, it’s very intensive . . . This is why flexibility is a priority.”

Mercadona, like most other good employers is known for its willingness to go the extra-mile. This reputation comes from a culture that puts people first. It also comes from a hardheaded calculation of how good employment practices will pay off.

Since its humble beginnings as a butcher shop in a small village near Valencia in 1977, Spain’s biggest supermarket chain has grown to include 1,614 outlets and over 100,000 employees. It is still a family business.

Juan Roig has run the company for the past 40 years. He is the son of the former owner of Mercadona, a Valencian butcher. Roig’s wife Hortensia Herero and Fernando are also principal owners.

Roig, along with Herrero who is Mercadona’s vice president, is widely credited for investing heavily in culture and sport as well as entrepreneurialism. Much of this money is channeled through the couple’s charity Legacy Project.

Mercadona, in response to the flash floods which hit Valencia, last year, for instance, was quick and generous to finance a wide range of community projects that would help to get the city on its feet. It also donates 25,000 tons of staple foods, which is equivalent to about 420,000 shopping carts, each year to vulnerable groups.

Such moves enhance its ‘employer brand’, as evidenced in its second-place ranking in reputation monitoring service Merco’s benchmark index of Spain’s most respected brands. Its nearest competitor is department store El Corte Inglés (16), followed by supermarkets Carrefour (43), Eroski (53), Lidl (61) and Dia (105).

“Mercadona takes great care to ensure the quality of its products.” [but] also for investing in its people and in innovation and entrepreneurship . . . it’s a family that is just returning a lot of money to society,” observes Manel Pérez-Jordana, founder of the Barcelona-based talent development specialist, Byknowmads.

Being privately owned, Mercadona also has more flexibility to reinvest in its business rather than paying out dividends to shareholders, as with its multinational rivals, Pérez-Jordana notes.

El Corte Inglés, placed 13th overall in Spain in the new FT ranking, has similar advantages as a non-listed company.

In recent years, a significant part of the reinvestment was spent on digitising Mercadona’s operation. The move also improved efficiency and removed routine jobs which sap morale.

Mercado invests in its people, and innovation.

The rapid expansion of the chain, including in Portugal, has been financed by reinvesting profits. This has in turn created opportunities for employees at the entry level to advance within the company. This prospect is encouraged by Mercadona’s active policy of skill training and recruitment from within. In the last year alone, Mercadona racked in 4mn total training hours. 

If you are good, the best grocers in Spain will promote you internally. You can start off as a shelf stacker and become a commercial director if you continue to work hard. “If you are a highly-skilled employee, that is also very attractive,” says Maria Miralles of McKinsey, the lead partner for retail in Iberia.

The retention of employees is a business imperative that has become more and more critical, given the fact that Spain’s economic growth rate is five times higher than Eurozone average. Miralles explains that it is nearly impossible to replace a fishmonger, butcher, or other skilled worker who leaves for a competing grocery chain.

Spain’s birthrate has decreased by almost 25% over the past decade. This has led to a reduction in the number young people joining the workforce. The top employers of the sector are therefore putting more emphasis on flexible working practices and employee welfare, as older workers tend to prioritize these.

The generous payment terms of Spain’s top-performing supermarkets are also explained by the emphasis placed on recruitment and retention. Since the introduction of its annual profit-sharing scheme in 2001, for example, Mercadona has shared €6.88bn with its workers. In the most recent bonus round, the policy saw workers with four years’ experience or more receive an extra €6,000 gross, equivalent to about three months’ salary.

Elena Orden, Merco’s spokesperson in Spain, said that increases in Spain’s minimum wage have narrowed the gap in the base pay of the industry. Most notably, in a sector characterised by high insecurity, the offer of long-term contracts by the likes of Mercadona and El Corte Inglés marks them out as different.

Orden explains that “in Spain, there is an inverted pyramid when it comes to the number of workers.” If you want the best employees, then you must offer them something that others don’t and place their well-being at the top of your priority list.