The owner of John Lewis and Waitrose cut 3,500 jobs last year amid efforts to save costs in a tough market – but employed its first group chief executive on a more than £1m pay deal.

The staff-owned group, which has 34 John Lewis department stores and 329 Waitrose supermarkets, said it employed 72,900 people in its annual report published on Thursday, down from 76,400 a year before, helping to reduce its pay bill to £1.79bn from £1.82bn.

Pay for the John Lewis Partnership (JLP) chair, Sharon White, remained steady at £1.12m, but the report indicates that its chief executive, Nish Kankiwala, who stepped into the role in March last year is now the highest paid director on £1.18m.

A further unnamed director, thought to be the outgoing finance director, Bérangère Michel, is paid between £650,000 and £700,000, with all other board directors paid £150,000 or less. The bosses of Waitrose and John Lewis do not sit on the board and so their pay is not revealed in the annual report.

Most staff cuts over the past year were in Waitrose stores after a rejig of shifts and some store management changes.

JLP has indicated that further job cuts may be on the cards this year as it said it would be investing in automation and other technology as part of “simplifying the way we work”.

The group, which calls its staff “partners” because they collectively own the business, is thought to be considering cutting up to 11,000 jobs over the next five years but said in March there was no target on how many roles would go.

The company recently announced plans to close one of its Waitrose delivery warehouses, putting more than 500 jobs at risk.

JLP’s annual report indicates that pay for directors is benchmarked against industry peers.

A spokesperson for the company said: “The reduction in roles has mainly been through natural turnover. We have made significant progress in the last year to transform the business and return it to profitability; we are investing record amounts in our retail brands and we expect profits to grow further next year.”

The group is in the midst of a turnaround plan under which it returned to profit this year but skipped paying its workers an annual bonus for the second year in a row.

JLP announced in March it made a £56m pre-tax profit in the year to 27 January, compared with a £234m loss in the previous year.

JLP plans to open its first new Waitrose stores in a decade and refurbish 80 more supermarkets while investing in technology to improve the John Lewis website and customer service for shoppers in stores.

The group is braced for a further shake-up under the incoming chair, Jason Tarry, the former boss of Tesco’s UK business who starts in September, replacing White.

White, who is stepping down before her five-year term ends in February next year, had been criticised for focusing too much on non-retail projects, including building homes to rent and expanding financial services, while the group’s main business languished.

She has since scrapped a target of ensuring that 40% of JLP profits come from non-retail business by 2030.