Employee Compensation Plan: Wal-Mart Stores - Essay Example

? Compensation Plan ‘Employee compensation’ may be defined as tangible monetary rewards and benefits that an employee receives during his tenure with a company. This no doubt has a direct impact on the individual performance, motivation, turnover and output of the company. The compensation strategy of a company must be well balanced to ensure a profitable business, while also maintaining employee morale and satisfaction levels. It is very important for any company to be in stiff competition within the industrial domain. The driving force for this competition is undoubtedly attained through the ‘human resources’ or the company’s ‘workforce’. Hence, companies try to adopt different compensation plans as per prevailing industry standards, work environment and employee expectations. Wal-Mart Stores Inc., under the brand name ‘Wal-Mart’ is an American multinational retail corporation. Being one of the largest retailers in the world, it runs chains of departmental stores and discount stores with large discounts. It can be declared as the world’s biggest private employer with 2.2 million associates worldwide. Hence, they ought to have a well planned compensation plan so as to motivate each associate to give their best. The competitive compensation package of Wal-Mart touched $5.2 billion last year in the United States. The employee wages are classified and structured depending on experience, skill set, problem-solving abilities and job accountability. Every associate is qualified to receive a ‘performance bonus’, based on the performance of their stores. A full - time employee is eligible to receive bonuses up to $1,800 at Wal-Mart per year. Also, the company is known to reward hourly associates and assistant managers who have completed 20 years of service in the company, thus motivating employees to give their long term service to the company. It is vital for a company to develop a broad minded outlook while making compensation plans for its employees. It is essential to consider health benefits and various saving plans for the associates apart from their regular weekly / monthly wages. These health benefits include the spouse and all children of the associates, hence taking care of the employee and his family. They also provide varied coverage, ranging from $5 per month to $8 per month depending on the region of work. Wal-Mart provides various ‘Profit share plans’ and ‘Stock purchase plans’ to help their employees earn money in a faster way (“Wages and Benefits”, 2007). However, Wal-Mart’s compensation strategy has been widely debated and severely criticized for its low worker’s compensation, which is believed to be influential in its ability to sustain its low prices. There is no doubt that the low product prices greatly benefit Wal-Mart’s consumers, especially from lower to middle class families. Wal-Mart’s strategy has been observed to focus on opening stores in ‘lower income’ areas. This indicates the company’s intention to minimize on worker compensation, along with other factors such as retail and merchandizing. The opening of Wal-Mart stores in a new locality is seen to lower the general wages on an average by 0.5 – 0.8% per worker in the merchandizing sector and by 0.8 – 0.9% for grocery workers (Bernstein, Bivens and Dube, 2006). The compensation plan has been slammed for charges that female employees are paid less than their male counterparts despite their achievement of greater performance ratings. The compensation plan at Wal-Mart is structured in such a way that hourly jobs are paid less while management positions are paid better. The process of promotion is defined in such a manner that an employee must complete a ‘Management Training Program’ in order to be appraised to the position of an Assistant Manager. It has been noticed that the other big retailers are found to pay more wages compared to that of Wal-Mart. There have been reports of employee grievances that show wage increments of as low as 20 or 40 cents per hour for a base pay of $8. It is thus apparent, that the existing compensation plan is not the ‘most appropriate’ for the company. The compensation plan must be regularly analyzed for job content and evaluated for requirements, benefits and working conditions. The most common methods of balancing internal considerations and market considerations at Wal-Mart may be achieved using ‘point methods’ such as ‘ranking plans’, ‘paired comparisons’ and ‘alternation ratings’. An analysis of internal factors and market positioning may be accomplished by placing the various jobs into categories and sub categories, based on the domain function, task or role. The most ‘beneficial ratio’ for Wal-Mart would thus be to strike a practical and firm balance between internal and market strategy, in order to attain stability within the organization and simultaneously minimize turbulence due to local and global market fluctuations. The current pay structure of Wal-Mart is stated to be a national average hourly wage of $ 12.40 for its full time workers, but does not clearly define the wages for its part – time workers. The permissible minimum wage set by the US Government has been $7.25 since 2009. In the year 2006, Wal-Mart launched a recognition program called ‘Associates Out in Front’, in a bid to appreciate its workforce and give due credit for consistent performance. Benefits under this scheme included an additional 10 percent discount on a single item during holidays to all its employees (beyond the regular 10 percent employee discount), a special polo shirt and a ‘premium holiday’ after 20 years of service to the company as well as Wal-Mart paying a portion of health insurance premiums for their employees. Wal-Mart also provided a toll – free hotline facility to its workers to report any issues on the work front, a website for direct contact with the then Chief Executive and an ‘Open Door’ policy, to register complaints or to report any sort of abuse to the higher authorities (Barbaro and Greenhouse, 2006). However, Wal-Mart found itself in major issues related to provisions and benefits to injured workers and raised objection to workers’ complaint claims. There were also reports earlier in the same year for Wal-Mart’s harsh retribution to employees who filed claims against worker’s compensation, which included shortening of hours, store location transfers against the wish of the employee as well as termination in some severe cases (“Wal-Mart’s Worker Compensation Program: How Wal-Mart’s Workers’ Compensation Practices Are Costing Its Workers, the States and Taxpayers”, 2007). This led Wal-Mart to come up with an Employee Bonus Compensation Program later in 2007 that estimated an average bonus amount of $651 per employee, variable depending on the part time / full time status of the employee as well as the individual profit made by the store in that financial year . Major competitors to Wal-Mart include other department stores such as Sears, Target and Kmart as well as competitors to Sam’s Club (a division of Wal-Mart) such as Costco and BJ’s Wholesale Club. Kmart is observed to have a number of employee – oriented benefits such as medical insurances (including dental and vision – related procedures), paid time – off vacation, job training, tuition fee contributions from the employer for higher education, wellness perks and future – planning bonuses such as life insurance and disability insurance policies. On the other hand, Sears provides employee benefits such as paid job training, scheduling, healthcare and dependent care assistance along with tuition reimbursement programs. The above benefits are also provided to the employees of Target; in addition, associates have the opportunity to access educational, home loan - related support as well as adoption assistance if required. In comparison, Wal-Mart follows a strategy that includes health and wellness benefits under Section 401(k) plans, health insurance, accident coverage, life insurance and reimbursement facilities. Wal-Mart employees are eligible to a certain amount of ‘sick time’ and disability insurance. Employees at Wal-Mart are provided emergency leave, special leave, bereavement leave and holidays, apart from the annual leave allowance. However, greater benefits are provided to full time employees compared to the part – time workers, who partake of more limited coverage and benefits. Appraisals and bonuses are found to be less lucrative than those provided by the competition. Above all, employees continue to ask for better wages and more affordable benefits from a retail giant like Wal-Mart. In conclusion, Wal-Mart must understand the changing trends of the workforce today. It would be primitive and closed – minded to assume that employees would continue to work for years with the same company despite being aware of less than average pay and lesser benefits being provided to them. Employee turnover rates have sharply increased world over and it is up to Wal-Mart now to stand up to the challenge. In a bid to cut down on attrition and improve employee motivation, I recommend that Wal-Mart provide substantial benefits to employees at shorter durational milestones of 3 - 5 years, instead of the 20 year yardstick set earlier. I also recommend that Advisory Team evaluate employee claims in a fair and just manner. It is very important that the concerns of employees are not dismissed on unfair grounds and that the employees are protected from negative implications that may arise due to the expression of their grievances. This would certainly improve the effectiveness of the discretionary benefits provided at Wal-Mart and make it a more enriching place to work in! References Barbaro M. and Greenhouse S. (2006) Wal-Mart Says Thank You to Workers, The New York Times – Business. Retrieved from http://www.nytimes.com/2006/12/04/business/04Wal-Mart.html?_r=0. Bernstein J. Bivens J. and Dube A. (2006) Wrestling with Wal-Mart - Tradeoff s between profits, prices and wages, EPI Working Paper, Economic Policy Institute. Wages and Benefits: Wal-Mart: Sustainability Progress to Date (2007) Retrieved from http://www.Wal Martstores.com/sites/sustainabilityreport/2007/associatesWages.html Wal-Mart’s Worker Compensation Program: How Wal-Mart’s Workers’ Compensation Practices Are Costing Its Workers, the States and Taxpayers (2007) Retrieved from http://Wal-Martwatch.com/wp-content/blogs.dir/2/files/pdf/workers_compensation.pdf. Read More