MADRID (Reuters) – Shares in Zara proprietor Inditex (BME:) fell as a lot as 4.7% on Friday after the world’s largest quick style retailer agreed an inflation-busting 20% enhance in common wages for store employees in its residence market of Spain.

Spain’s two largest unions, CCOO and UGT, introduced the pay enhance late Thursday, with UGT saying salaries had been set to rise as a lot as 40% in some elements of the nation.

Inditex, which employs about 165,000 individuals in 177 nations, with a 3rd of all employees based mostly in Spain, didn’t reply to a request for remark. About 86% of employees work in its 6,477 retailers and most are girls.

The pay hike is a part of a “technique of homogenisation” of working situations for workers in Inditex’s completely different manufacturers, in accordance with the settlement doc signed by Inditex and unions seen by Reuters.

In addition to Zara, Inditex owns eight manufacturers in Spain together with Massimo Dutti, Pull & Bear and Bershka.

The transfer establishes a marker for Inditex rivals in Spain which might be nonetheless negotiating wage will increase, unions mentioned, and will show a headache for companies and policymakers making an attempt to maintain a lid on inflation.

“Wages for Inditex store employees had been very low in some locations in Spain,” UGT union chief Alvaro Cajigal mentioned. “We hope it should set a precedent for different retail chains”.

Spanish shopper costs rose 5.8% year-on-year in December, preliminary knowledge from the Nationwide Statistics Institute confirmed. Common annual inflation was 8.4%, the very best since 1986.

Spain’s most important enterprise group CEOE welcomed the settlement however warned too many wage will increase may provoke a second wave of inflation.

Inditex has already set itself aside from some rivals by passing on a bigger chunk of rising prices, and analysts anticipate it to proceed elevating costs.

“Even when value of products bought headwinds are reversing there’ll nonetheless to be value will increase to assist mitigate the rise in wages,” Deutsche Financial institution (ETR:) analysts mentioned in a latest report.

Different Spanish retailers reminiscent of supermarkets chains have up to now restricted pay rises to inflation, however Inditex rival Quick Retailing Co, proprietor of Uniqlo, provided a rise of as a lot as 40% in January in Japan.

Analysts speculated that such a transfer would stress different style retailers to comply with go well with amid a battle to retain younger expertise in tight labour markets.

Sweden’s H&M in December introduced a 500 euro ($535) bonus to 4,000 store employees in Spain and Portugal after Inditex provided 1,000 euros to buy employees in its residence market.

The wage will increase will value Inditex about 167 million euros a 12 months, or about 9.7% of its working prices, Bankinter mentioned in a observe to purchasers.

The brand new enhance means Inditex pays a minimal wage of 1,500 euros ($1,610) a month to buy assistants and a minimal of two,041 euros for employees with extra duties, the labour settlement mentioned.

Store assistants can even obtain month-to-month gross sales commissions and annual incentives that may enhance their salaries to at the very least 1,900 euros monthly, UGT mentioned.

Unions mentioned Inditex additionally agreed to proceed growing salaries in keeping with inflation over the following three years, as different retailers in Spain have agreed.

($1 = 0.9318 euros)