Wal-Mart is giving raises to the vast majority of its U.S. employees as part of the world’s largest retailer’s previously announced investment in its workforce. The move comes as it seeks to hold onto workers in an increasingly competitive market.
Wal-Mart Stores Inc. on Wednesday said more than 1.2 million U.S. hourly workers will get wage increases on Feb. 20. The company, the largest U.S. private employer with 1.4 million total workers, also said it will provide free, basic short-term disability to full-time hourly workers. And it will start allowing workers to accrue paid time off as they earn it.
The moves mark the biggest changes Wal-Mart has made in its efforts to offer better wages and benefits to its workers. They come as company faces pressure from labor-back groups who have criticized the company for its treatment of its workers.
Last February, Wal-Mart announced that it would raise base employee wages for 500,000 workers to $9 an hour last year, with plans to move it to $10 per hour, next month. The company also said new entry level workers hired after Jan. 1, 2016 would start at $9 per hour, but move to at least $10 an hour after completing a six-month training program. Then last June, Wal-Mart said it would raise starting wages for more than 100,000 U.S. department managers.
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In total, Wal-Mart’s CEO Doug McMillon said in October that last year’s investment in wage increases, along with improved training, cost $1.2 billion. McMillon also said the company expects to pump $1.5 billion in to its workforce this year, although at the time he did not give details.
Wal-Mart has maintained that if it keeps its workers happy, they will serve customers better. That will lead to higher sales. Retaining and attracting workers is critical as a stronger labor market increasingly offers workers more opportunities to jump around.
“The competition for talent is strong,” said Craig Rowley, global leader of consultancy Hay Group’s retail practice. “It’s strong because there are fewer people to hire.”
Rowley says the turnover rate – the percentage of part-time workers who leave within a year– is now 67 percent for the retail industry, up from 50 percent during the recession.
Wal-Mart has already seen sales perk up in its U.S. business as customer experience improves in the stores. But those investments are also coming at a cost to the business. Wal-Mart said last October that earnings for the year, starting next month will be down as much as 12 percent, in large part due to the investment in its workforce. But Wal-Mart has been willing to take a hit to the bottom line.
“We are very clear that if we make sure our associates are being treated fairly, if they are rewarded simply and clearly, we will have a better business,” said Judith McKenna, chief operating officer for Wal-Mart’s U.S. division.
As a result of the latest pay increase taking effect next month, the average full-time hourly wage at Wal-Mart stores will be $13.38, up from $13. For part-time workers, the hourly wage will be $10.58, up from $10. Last year, before the changes, the average full-time hourly wage was $12.85 and $9.48 for part-time. Wal-Mart declined to provide the average hourly wages for Sam’s Club workers.
Those wages for Wal-Mart stores are still below the $14.95 average that hourly retail workers in a non-supervisory role earn, according to government data that includes people who work at auto dealers and other outlets that would likely pay more than discounters like Wal-Mart. But Wal-Mart’s entry level pay is above the $9.26 average hourly pay for cashiers and low level retail sales staff, according to the Hay Group’s survey of 140 retailers with annual sales of $500 million. The survey was conducted last summer.
Wal-Mart’s initial moves triggered complaints from workers who felt that the raises weren’t spread out evenly. Many of the new employees were getting increases in pay, making their pay closer to other workers who had been at Wal-Mart for a long time. The company acknowledged Wednesday that some employees were upset.
“We did hear from some associates who did feel left out last time, but we specifically did it to reward associates in a fair, consistent and transparent way,” said Wal-Mart spokesman Kory Lundberg.
Here are more details of Wal-Mart’s plan:
▪ Workers who are already earn more than $10 per hour will receive an annual pay increase in February rather than waiting until the anniversary date.
▪ The company is also raising the starting rate of its non-entry level hourly pay bands. So specialists like deli sales associates will make between $10.50 and $18.81 per hour, up from $9.90 to $18.81. Workers at or above their pay band maximum will automatically move up to the new minimum.
▪ Workers who are at or above their maximum pay band will get a one-time lump sum payment equal to 2 percent of their annual pay.
▪ Starting March 5, full-time workers can carry up to 80 hours of paid time leave from year to year. That number will be 48 hours for part-time workers. Any unused hours at the end of the year above the limits will automatically be paid to hourly workers in the first paycheck every February. Previously, workers would just lose those days if they hadn’t taken them.
▪ Wal-Mart is offering a short-term basic disability plan for workers who need to be away for an extended time. Effective Jan. 1, the plan will pay 50 percent of a worker’s average weekly wage, up to $200, for up to 26 weeks.
▪ Wal-Mart is also enhancing its short-term disability plan, which now will cost less than the company’s prior voluntary plan and provide more coverage. Workers will receive up to 60 percent of their average weekly wage with no weekly maximum for up to 26 weeks. Prior to that, the figure was 50 percent.