Wal-Mart Changes Compensation Plan

Oct 11, 2010

By George Anderson

Whenever Wal-Mart Stores makes a change to its compensation plans, there is
going to be a high level of scrutiny. The company’s announcement that it would
end profit-sharing contributions to employees and move to a company match on
401(k) plans as well as putting aside money for workers’ healthcare accounts
is no exception.

Wal-Mart said it was making the move to help its associates be in a better
position to share in the company’s success.

Dave Tovar, a spokesperson for Wal-Mart, told The Associated Press that
by matching up to six percent of employees’ 401(k) contributions, the retailer
would help them "grow their retirement savings much faster than before."

A report by Bloomberg News said Wal-Mart had been contributing four
percent to the profit-sharing plan.

"There are very few companies that only have profit-sharing plans anymore,"
David Wray, president of the Profit Sharing/401k Council of America, told Bloomberg.
"Profit sharing is variable and up to the company’s discretion and a fixed
match is more predictable."

According to Reuters, Wal-Mart is also contributing $500 for associate-only
healthcare accounts to cover medical expenses before any deductible coinsurance
is paid by its workers. The retailer will contribute $1,000 for plans covering
workers and their dependents.

Employees at stores and distribution centers would also be eligible to receive
bonuses based on reaching performance goals set for individual locations.

Mr. Tovar told Bloomberg that the changes are part of a "comprehensive
benefits package" and workers now have "the potential to receive
more income today through our bonus incentive programs, and incentives to save
and help them plan for retirement."

It’s hard to assess whether the changes in Wal-Mart’s compensation program
will cost the company more or less than what is currently spending because
it depends largely on employee participation.

Kalila Sams, a part-time customer-service manager at a Wal-Mart in Atlanta,
told Bloomberg she intended to join the 401(k).

"Things are tight right now, but it would encourage me to save because
you’re putting money away before you see it," she said.

Jennifer Stapleton, assistant director at WakeUpWalmart, said the move from
profit sharing to the new plan would cut what workers earn.

"To demand that people who already make poverty-level wages begin to
pay in order to receive any retirement benefits is out of touch with the reality
of associates’ lives," she wrote in an email sent to media outlets.

Discussion Questions: How do the changes made in Wal-Mart’s compensation
program compare to what else is out there in the retail industry? Will the
changes make Wal-Mart a more or less attractive employer for those looking
at retail as a possible career?

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4 Comments on "Wal-Mart Changes Compensation Plan"

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David Livingston
11 years 7 months ago
I don’t think Wal-Mart’s business model is designed for having career workers except for skilled employees. So minor changes in low-level compensation are not going to suddenly make Wal-Mart the holy grail employer in retail. I have to agree with the WakeUpWalmart crowd. For responsible employees, this will mean an increase in compensation. However, we all know Wal-Mart doesn’t hire the most fiscally responsible people. They live paycheck to paycheck and contributing to a 401k is not a priority or even a realistic option. A lot of employees never stick around long enough to get into the health plan. Even if they do, they probably qualify for less expensive or free insurance provided by Medicaid type programs. With high turnover, most will leave the company before tapping into any health savings plan. On the bright side, this is good for Wal-Mart and their stockholders and hopefully the savings will trickle down to lower prices for consumers. Compared to other retailers, Wal-Mart is as generous as most. If someone is looking for a true retail career… Read more »
Ed Rosenbaum
11 years 7 months ago

I agree with David. Wal-Mart’s labor force is made up primarily of lower wage earners and more to the part time staffing model. That being the case, the changes to the 401(k) and medical coverage are not going to shake the windows and rattle the industry like so many of Wal-Mart’s decisions have in the past. What I can see happening is this attracting more potential long-term employees to view Wal-Mart as a viable employer for a possible longer career.

John Boccuzzi, Jr.
John Boccuzzi, Jr.
11 years 7 months ago

This is an interesting move for Walmart, a company that has traditionally been focused on cost cutting and short term gains (low prices). Helping employees save for retirement regardless of their income level is a good step forward in helping their employees plan for the future. At some point you are going to retire and it would be nice to have something saved more than just your Social security.

WakeUpWalmart does bring up a good point that overall compensation may still be below what it needs to be. Maybe that is something Walmart will look to tackle next.

Mark Burr
11 years 7 months ago

Whether it’s what WM is doing or something else, retailers are no different than any other company. Most are all looking for ways to cut costs, cut benefits, cut, cut, cut and cut again.

Their change is likely a wash. However, it’s a good match if they are matching up to 6%. Nevertheless, it’s change. It’s spun either way, depending on perspective. Does it structurally create a better long-term sustainability position for WM? Sure, but that’s not really a question, is it? Would a dissident be happy no matter what they do? Not so much.

Does it have any real affect whatsoever on WM as a better career employer? No. WM already thinks they are one. Those who work there? That’s up to each one of them. Those who shop there? They aren’t shopping there because of how they compensate their associates. Wait a minute! They are!


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