Sir Stuart Rose has tackled Jeremy Paxman on pants and confronted the biggest institutional investors in the City, yet the Marks & Spencer executive chairman is facing his biggest test of the year - a mutiny among his own workforce.

Employees, who are furious about company proposals to cut redundancy benefits by up to 25 per cent, vowed to fight what they claimed was only the latest attack on their benefits. One said: “It’s about time this came to light. A lot of people are pleased it has. Morale is really low. There’s a lot of people who, over the last year, have decided enough is enough and simply walked away.”

Another said: “I know we get a better deal than most, but if you have a better car than the next man, you’re still going be as upset if it’s vandalised.” He added that the poor morale had been highlighted by a recent staff survey, which suggested that some employees believed that bullying was tolerated. M&S denied the claim vehemently yesterday.

The retailer intends to push through the new redundancy terms by September 1. It wants to cut the maximum payout that employees can receive in relation to their length of service from 70 weeks to 52 weeks. An employee due £35,000 under present terms would see their payout fall by £9,000.

The proposals have convinced staff that widespread job cuts are on the way. M&S declined to comment. However, one retail expert said yesterday that every high street chain was looking to cut back. Richard McKenzie, a partner with OC&C, the strategic consultancy, said: “There’s no doubt that people are scheduling labour much more tightly this Christmas than others. I’d be surprised if you don’t see significant job cuts over the next six months.”

Matthew McEachran, a Kaupthing retail analyst, said that a recent visit to the M&S flagship at Bluewater indicated that the group had begun to cut a large number of jobs at store level. Referring to the redundancy proposals, he added: “While cost-cutting is a necessary evil as the downturn sharpens, this action is likely to raise concerns that trading has deteriorated further.”

M&S is continuing to consult employee groups about the new redundancy terms but it does not need their approval to implement them. Even with the changes, the package would still be one of the best on the high street, with staff aged more than 41 given three weeks’ pay for every year of service, which M&S asserts is double the statutory minimum.

However, the changes come only a year after M&S overhauled the pension scheme in a way that forced staff to increase their contributions to guarantee the same level of benefits.

One employee said that M&S risked losing an important part of its reputation. “M&S was seen as a great place to work,” he said. “Many now feel that is not the case.”

The latest headache for Sir Stuart comes in one of the most difficult years of his career. After being taken to task by Mr Paxman over the quality of M&S underwear, he was criticised for taking on the dual role of executive chairman, which was thought to fly in the face of corporate governance best practice. In July he issued a profit warning that wiped £1.2 billion from the M&S share price.

Q&A: M&S responds to staff concerns

Why are you making these changes to the redundancy terms now?

The last time we changed the terms was in 2006, so we were due a review. Our policy is up to date and in line with the market. It is the same for any responsible business

What reassurance can you give that you will not be going straight into redundancies after the consultation?

As before, we’re not commenting on this either way

What are the potential savings from the changes?

This is a hypothetical question - we would not speculate

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