Compensation Practice in Wal-Mart Corporation - Case Study Example

? Compensation Practice due Introduction Wal-Mart is an American multinational retail corporation that runs chains of large discount department and warehouse stores. Wal-Mart is a family owned business and third largest public corporation with the biggest private employer in the world. The company was founded by Sam Walton in 1962 who declared three policy aims would define his business: respect for the people, service to consumers, and determined for excellence. Wal-Mart's corporate management strategy involves selling high class and brand name products at the lowermost price. In order to keep low charges, the company decreases costs by the use of innovative electronic technology and warehousing. It also negotiates contracts for produce straight from manufacturers, eliminating the middleman. Wal-Mart incorporated in 1969 and became Wal-Mart Stores, Inc. In 1972, Wal-Mart was added to list of companies on the New York Stock Exchange, and it is the grocery retailer in the United States. Wal-Mart provides general produce: family attire, health and beauty assistances, electronics, toys, fabrics, crafts, lawn & garden, jewelry and shoes. Wal- mart runs a pharmacy department, Tire and Lube Express, and Photo processing center (Foley et al, 2000). Compensation strategies of Wal-Mart Inc., best practices they are applying, and compensation-related challenges they are facing. Effective compensation systems attract and retain qualified workers motivates employees, communicates an organization strategy, its cost structure reflects the organization’s ability to pay, and complies with all government laws and regulations. Compensation in Wal- mart is divided into two, cash compensation and fringe compensation. Cash compensation is the direct pay to the employee for work done. It has two components: base pay that is paid in terms of hourly or weekly over time basis. The second component is the payment contingent on performance. This is based on the merit increase, bonuses and increase sharing. Fringe compensation refers to employee benefits programs. Fringe compensation has two dimensions: legal required programs such as social securities and discretionary programs like health benefits, tuition reimbursement and pension plans. Wal- mart also faces compensation challenges such as high turnover rate. Approximately 70% of Wal- mart workers leave within the first year. Wal-Mart employees have been quitting their jobs because they have found other companies that pay them better and fair wage. The high number of employees quitting due to low wages has caused Wal-Mart to have a high turnover rate. Despite high turnover rate, Wal- mart is still able to affect the unemployment rate. Lack of health insurance benefits offered to employees is the main cause of high turnover rate for Wal-Mart. Workers need health insurance for themselves and families. Since their employees are not getting the health benefits needed they are leaving Wal-Mart to find another company that will give them the health benefits desired and for a lower out of pocket premium. Costly legal challenge is another challenge faced by Wal- mart, where it was accused of colluding to bound medical care for injured staffs in an attempt to save cash. In Colorado, the law gives workers with on-the-job injuries the right to file medical-care dues against their boss. Most companies carry insurance policies to pay such claims (Swezey et al, 1985). How Wal-Mart applies compensation practice to determine the positive or negative impact to the company and its stakeholders Stakeholders are people, organizations or groups who affect or can be affected by a company or organization. These stakeholders can be separated into two groups: the market and non-market stakeholders. The market stakeholders are those sets and individuals who have an economic post in what the company does. The non-market stakeholders are those groups and persons who have a non-economic stake and political stake in what progress the company takes. Wal- mart must strive to remain competitive, productive, and profitable by maintaining Fair and Effective Compensation Practices. Wal-Mart’s problem with their compensation is that they pay their CEO’s much more than regular workers especially, the subcontractors in other countries. This leads to a negative impact to the company and its stakeholders. The junior employees will quit and join other companies thus will lead to under employment in Wal- Mart. Wal-Mart unreasonably delays paying lawful benefits and by challenging clearly genuine workers’ compensation claims. Wal-Mart announced plans that it was analyzing a flexible programing policy, which would require employees to change cycles instead of stable moves. Workers claimed that the policy was intended to force permanent workers to change to a casual time table, thereby saving Wal-Mart the cost of wages and benefits and infringing the employees’ rights. Wal- Mart is a non- profit organization that promotes work place policies and practices that work for everyone. Wal- mart offers information, education and aid to individual employees and their advocates national and upholds public policies that advance worker rights. Wal- mart’s goal is to bring workers together, employers, advocates and policymakers to achieve fairness at work (Insight, 2007). Ways in which laws, labor unions, and market factors impact Wal-Mart’s compensation practices. Provide specific examples to support your response. Wal-Mart has been a question to blame by numerous groups and individuals. Among these are, laws, labor unions, and market factor. Wal- mart has faced issues involving low wages, poor working conditions, inadequate health care and company’s anti-union policies. Wal-Mart has also faced accusations on poor working conditions of its employees. In 2005, a law suit filled against Wal- mart asserted approximately 160,000- 200,000 employees were forced to work off-the-clock and denied over time payment and were not allowed to rest. Wal-Mart has long been alleged of partial practices with regard to its employees. In 2009, employees of Wal- mart Inc. sued the company and two other defendants, alleging that the retailer interfered with how employees’ compensations were paid for accidents incurred in the operation line. In 2000 audit results showed that Wal- mart extensively violated juvenile labor laws and state rules demanding period for breaks and meals. Wal-Mart Stores Inc. is taking its first lawful action to stop protests and rallies targeting the union that it is behind unfair labor practices. Wal-Mart filled unfair labor practice charge against United Food and Commercial Workers International Union requesting the National Labor Relations Board to stop what the retailer says are unlawful efforts to interrupt its business. Wal-Mart very often is accused of valuing produces too low to motivate competition out of commerce and gain a control in local markets. In 2003, the German High Court ruled Wal-Mart's low-cost rating strategy destabilized competition (Hicks, 2007). Wal-Mart faced charges of monopoly, by making suppliers reliant on them and compelling them to indulge in self-defeating practices, as pressuring them to sell goods at prices lower than they would get elsewhere. Effectiveness of traditional bases for pay at Wal-Mart The traditional model for organizing base pay programs has existed in unchanged form for more than 50 years. In the 1800s business owners knew their workers, their performance, and monetary necessities. Individual pay was established on that basis. As businesses grew, organizations were created to offer structure, organization, and path. Professional managers replaced business proprietors and rapidly growing hierarchies distanced managers from most junior workers. Competence and success became the highly important business goals. Fredrick Taylor in 1800’s designed a formal and systematic way of assigning pay to jobs and identifying methods for Improving Productivity. This came to be known as job evaluation. Job evaluation is the process of assessing the value of each job done in relation to other jobs in the company. Traditional compensation program uses this to create internal equity and external equity among jobs. Internal equity means that each employee views their position is treated fairly within a payment program in relation to other jobs, and external equity is the process of pricing jobs by identifying compensation provided by other companies for similar jobs one is doing. Traditional job evaluation is divided into three steps. During step one, job analysis is conducted. In this step evaluation and collecting of information about the job is done. Step two involves actual job rating whereby some standardized approaches to job analysis is done to determine the pay. Step three involves cautiously studying the job evaluation results. This is done by arranging jobs in ranked order using job evaluation results. In this stage evaluators should be able to identify critical partialities that may have sneaked into the evaluation process (Wallace et al, 1988). Conclusion Wal-Mart Stores U.S. is the company's largest division, accounting for $258 billion that is 63.8 percent of total sales for the financial year 2010. It consists of three retail formats that have become public domicile in the United States: Discount Stores, Supercenters, and Wal-Mart Marketplaces. The retail department stores sell a variety of mostly non-grocery products; however emphasis has now moved towards supercenters, which include more grocery items. This partition also comprises Wal-Mart’s online retailer. About 40% of products sold in Wal- mart are products offered by Wal- mart and produced through contract with manufacturers. Wal- mart low prices enable a lot of customers out come. Effective compensation systems attract and retain qualified workers motivates employees, communicates an organization strategy, its cost structure reflects the organization’s ability to pay and submits with all government rules and principles. A worker’s compensation should take account of the dangers that the employee takes on behalf of the company. Compensation should take into consideration forthcoming threats and risk outcomes that are previously realized. Wal- mart should strive to compensate its employees effective and in-line with the law. References Foley, S., & Bradley, S. P. (2002). Wal*Mart Stores, Inc.. Boston, Mass.: Harvard Business School Pub.. Hicks, M. J. (2007). The local economic impact of Wal-Mart. Youngstown, N.Y.: Cambria Press. Insight, I. (2005). The economic impact of Wal-Mart. Boston, Mass.: Global Insight. Swezey, C. L., & Peyrat, P. I. (1985). California workers' compensation practice (3rd ed.). Berkeley: California Continuing Education of the Bar. Wallace, M. J., & Fay, C. H. (1988). Compensation theory and practice (2nd ed.). Boston, Mass.: PWS-Kent Pub. Co.. Read More