Walmart Compensation Scheme

Walmart Compensation Scheme

Since the onset of the twentieth century, the minimum wage discussion has remained a contentious issue in the American economy. Part of the reason is that, in a capitalist economy, most of the jobs stem from private firms. For instance, Walmart is the largest firm and employs 2.3 million Americans (Wal-Mart, n.d). The most profound outcome of the unregulated minimum wage was observed at the turn of the twentieth century when the economy experienced considerable upheaval to the extent of downwarping. Corporations sought to cut costs as a means of surviving in the industry. As a result, labor costs were significantly reduced to the extent that employees only earned pennies. Consequently, workers experienced extremely low standards of living. This poor pay instigated the Great Depression that occurred. In remedying the situation, the government enacted labor laws that dictated minimum pay limits (Neumark & Wascher, 2008). The economy recovered over time and was eventually restored. Hence, the issue of minimum wages is critical and, if not tackled, could adversely affect the economy. Up to date, privately owned firms such as Walmart, Target Stores, and Amazon are still battling with the issue. This report seeks to explore Walmart’s compensation scheme, its challenges, and implications. The study then compares this scheme to Walmart’s competitors and derives a recommendation for these challenges.

Literature Review

Walmart’s Background

Walmart was founded in 1962 by Sam Walton in Rodgers, Arkansas. The store later expanded to other regions in the United States. Walmart has attained a niche by reducing its profit margins by offering significantly lower prices in comparison to its competitors. The firm’s slogan states, “Save people money so that they can live better” (Wal-Mart, n.d). From the slogan, Walmart’s goal is to lower the cost of living for its customers. However, this initiative has been undertaken at the expense of its employees, given that they exhibit significantly lower standards of living due to their poor pay. In its defense, the company stated that its model does not allow for high wages, given it relies on minimal profit margins. On the contrary, its top executive earns wages in the region of $175,000. Walmart has achieved remarkable growth within forty years and has been ranked at the top of the list of Fortune 500 firms for four consecutive years. In the current fiscal year, whose quarter ended on April 20^th, 2019, the firm recorded a $30 billion net profit.

Walmart Employee Benefits And Compensation Challenges

Challenges arising from Walmart employee relations arise from its constrained labor costs. They include low pay, limited employee benefits, and evading collective bargaining with its personnel. This model follows profit maximization through cost reduction, with the operation cost decrease being achieved by reducing labor costs. Low wages by the firm are viewed as unethical as the firm records considerably high profits. The restriction of joining labor unions for collective bargaining is an infringement of employees’ freedom. This restriction ensures the company maintains low rates without attracting pressure from involved parties.

Walmart has faced multiple low ranks arising from its compensation scheme. Among them was poor pay, given the employees were receiving lower payments compared to other departmental store workers. The firm was also not providing health coverage to its employees. Adding salt to injury, Walmart has been infringing federal labor laws. For instance, in 2001, the company was fined a total of $ 6 million and was required by the law to change the hiring practices for people with disabilities. In 2004, the firm faced another lawsuit for exposing minors to dangerous machinery without covering for their health insurance. The firm has also been practicing gender-based discrimination in compensating its workforce. This prejudice manifests in recruitment, compensation, and promotion. Female employees have been receiving less pay in spite of being in similar ranks and undertaking similar workloads as their male counterparts. For instance, Francine Radtka, a former deli manager at Walmart in Florida, filed a lawsuit against Walmart. The plaintiff complained that while working for the corporation between 1995 and 2000, she discovered she was receiving less pay than other male departmental managers (Lieber, 2019). The claimant later quit her job after being appointed bakery manager without additional salary benefits.

Jenny Hicks, another employee, also filed a lawsuit citing she had been training Walmart employees who were promoted to higher ranks while she was left out. The plaintiff cited her trainees were men and received higher pay in spite of having less experience than her. The Walmart versus Dukes case represented 1.5 million females that constituted both current and former Walmart employees (Iannelli, 2019). Other lawsuits filed against Walmart claimed unequal opportunities between its male and female workforce. Job positions offered to female workers constituted neither growth nor promotion opportunities. Women were being recruited for cashier and associate roles while their male counterparts were posted to the sporting and electronic products section, which exhibited greater opportunities for promotion. In the end, female workers received less pay in spite of their efforts. Female employees were also facing the challenge of termination as a result of pregnancy-related absences. The national legal advocacy filed a lawsuit against the firm in 2018 for infringing the New York state pregnancy accommodation statute (Lieber, 2019). Litigation from Cindy, who was a Walmart employee for 19 years, requested the corporation to release documentation on the compensation scheme for all its employees to which it failed.

Walmart has, on several occasions, violated the Americans with Disabilities Act (ADA). The Equal Employment Opportunity Commission (EEOC) filed a lawsuit against Walmart for discriminating against and mistreating a manager, Keller, due to his old age (U.S EOCC, n.d). Moreover, it was claimed that the corporation did not accommodate his disability. The same agency charged the company for excluding a female congenital amputee from their recruitment process (U.S EOCC, n.d). The firm’s recruitment team assumed she could not perform the duties listed in the job description in spite of previously working in a departmental store. ADA prohibits employers from discriminating against people with disabilities based on their assumptions and stereotypes. Especially when these workers have proven their ability to perform the duties detailed in the job description. To top it all, Walmart has been accused of overworking its personnel without fairly compensating them. A class action case was filed against the firm for denying its employees from taking breaks and not paying for all hours worked. The allegations affected 187,000 Walmart employees who worked in Pennsylvania in the period between 1998 and 2006. The firm lost funds amounting to $188 million in fines from this lawsuit.

Walmart Competitors’ Compensation Schemes

Similarly, Target Stores has been criticized for low compensation schemes. The firm does not offer its workforce health coverage against hazards in the workplace. Additionally, the store has also faced several cases based on low wages and unequal pay. Presently, the firm maintains an hourly pay rate of $13 after increasing it by $1. Nonetheless, the firm has a higher wage rate than its competitor, Walmart, which currently pays $11 (Bose, 2019). Amazon has also received its fair share of criticism for poor pay over the past. Owing to this plight, Senator Sanders launched a bill dubbed the “Stop Bezos” Act. The bill was meant to wage higher taxes on employers for the poor pay of their workers. Poor pay lowers the living standard and causes the employees to rely on the government for basic services such as healthcare and retirement benefits. Amazon responded by raising the minimum wage rate to $15.Thus, the departmental stores and e-commerce industry players have been experiencing similar compensation challenges and have resolved the challenge by increasing the wage rate.

On the contrary, some companies in the same industry have been competently compensating their workers. Such firms have even been labeled the “testimony to ethical capitalism’. Costco, a competitor in the industry code of ethics, states that the firm’s prosperity is dependent on employee adherence to the firm’s standards (Perino, 2019). Increased minimum wage advocates refer to Costco as the illustration of how a company’s prosperity can be enhanced through adequately meeting employees’ welfare. Costco’s compensation scheme is 40% higher than the industry’s rate. The firm’s workforce receives a minimum wage of $20 per hour (Perino, 2019).

Additionally, the firm offers more competitive health insurance and retirement benefits as opposed to Target Stores and Walmart. Notably, 88% of workforce insurance is sponsored by Costco. The labor turnover is significantly lower since employees rarely leave the company. Furthermore, the firm trains its workforce by equipping them with skills such as problem-solving to enhance their value. More often than not, increased minimum wage critiques cite that firms have to compromise between employees’ and shareholders’ satisfaction. However, Costco’s competitive compensation plans prove otherwise. Costco has emerged as the best employer and has surpassed Alphabet Inc., which previously held the title. At the same time, Costco has maximized shareholders’ wealth through competent financial performance.

Implications

The implications arising from low wages manifest both socially and economically. The direct economic impact is a decline in standards of living. Minimum wages determine the consumption and investment levels, which are essential in contributing to economic growth (Neumark & Wascher, 2008). Low wages reduce the purchasing power of citizens who, in turn, consume and invest less. Decreased demand for products and services reduces firms’ profitability. Such firms, in turn, take initiatives such as reducing the workforce to maintain their profit margins (Parker, Arrowsmith, Fells, & Prowse, 2016). Over time, if not regulated, the decline is observed in the economy. On the other hand, higher salaries increase consumer purchasing power, leading to consumers demanding more goods and services. Increased demand enhances firms’ profitability through increased revenue streams. Not to mention, enhancing employees’ benefits is also beneficial in that it improves their morale. As a result, they become more productive and improve their output. A firm that treats its employees well benefits in that they develop goodwill towards the firm and maximize their efforts. Employees entail a special force in enabling an organization to realize its objectives. Furthermore, employee welfare is part of a firm’s corporate responsibility. Therefore, customers are willing to purchase products and services from firms that exhibit positive employee relations. Investors are also willing to invest in firms that maintain positive relations with their employees.

Notably, due to the minimum wage rates, the labor participation rate has declined. Another economic implication is increased taxes. The U.S. mandatory budget has been on the increase for a significant period. The government primarily relies on federal taxes to fund its expenditures. Spending areas include healthcare costs. Through Medicare and Medicaid, U.S. citizens receive assistance from the government in seeking medical services. The mandatory budget is also composed of social security, such as retirement benefits plans. Therefore, if firms continue issuing low wage rates, the government’s spending on the mentioned services will increase. Consequently, federal taxes will rise. A huge mandatory budget prevents the government from undertaking essential development, for instance, the improvement of infrastructure. Not to mention, a higher mandatory budget inhibits the government from intervening in the economy through discretionary fiscal policy. This policy allows for the government to alter its expenditure levels as a way of controlling inflation and combating a recession. Therefore, minimum wages should be raised to enhance self-support for employees and their families.

Higher wages and improved working conditions motivate workers to improve their output, which enhances the long-term viability of a firm. Employees who receive workplace satisfaction can focus more on their work. On the contrary, those who receive poor pay are constantly worried about how they will meet their needs, thus distracting them from their work. In the present world, most women are breadwinners, and their families rely on them for survival. Hence, they deserve competent compensation, just like their male counterparts. Failing to issue equal pay to both genders results in low morale among the female workforce, and a demoralized workforce tends to be less productive. Also, a firm misses out on the talents and expertise of this population group. A firm’s reputation is also compromised due to discrimination waged against minorities such as women and people living with disabilities. Customers’ goodwill may be affected by these occurrences, and this tends to hurt companies’ growth.

Recommendations

Walmart has lost a significant amount of money in the form of fines arising from litigations from both its former and present employees. Additionally, the firm spends significant amounts on contracting attorneys for representation in court. Among other costs arising from the issue of the minimum wage is a decline in employee goodwill, which decreases their motivation. Also, the firm earns a negative reputation from its esteemed customers and investors. Therefore, costs arising from compensation schemes such as minimum wages and unequal pay outweigh the benefits. Also, Costco has proven that wages can be maximized without compromising other stakeholders. Competent remuneration is the most effective approach to enhancing employees’ motivation.

In solving the issue of the minimum wage, Walmart should develop an optimal compensation scheme that would maximize the employees’ wealth. At the same time, this scheme should be viable in the long term. The firm should not contract the workforce in the future as a means of controlling unsuitable labor costs. For instance, after the pay rise announced by Walmart earlier in the year, the firm laid off 10,000 employees. This contraction would translate to an additional workload for the retained workforce. Hence, there wouldn’t be an increase in salary as it would be accompanied by additional workload. Moreover, the firm should offer extra benefits, such as health coverage. Competent compensation would improve workers’ living standards. At the same time, employees would not over-rely on the government for essential services such as medical care.

On the issue of equal pay, Walmart should offer equal opportunities to both male and female workers. Following the equal pay statute in the Fair Labor Standards Act, the organization should develop fair compensation practices. Moreover, the company’s policy should address the issue, such as setting a threshold for the minimum number of women required in top management. Given that female employees complained of being denied positions that exhibit growth, there should be policies on gender representation in each sector. On the same note, people with disabilities should be considered in the recruitment process. Most importantly, Walmart should offer accommodation for such workers.

In spite of the stated accusations of low wages, Walmart has undertaken several initiatives to remedy the situation. In 2017, the corporation increased the wage rate to $10 per hour and $11 in 2019. In creating a suitable working environment, Walmart established a weekly schedule for its employees. The timetable was to replace the on-call policy, which was previously in place. Consequently, the employees will have ample time for personal development and tending to other activities not related to work. These initiatives are meant to enhance employee satisfaction and maximize their productivity. Nonetheless, there is still a need for more initiatives to improve employees’ welfare from Walmart. Additionally, the procured wage increments are still wanting as the corporation is still lagging behind its competitors.

Conclusion

The minimum wage debate has remained a controversial issue in the American economy since the 21^st century. Given that the U.S. is a capitalist economy, most jobs stem from the private sector, which determines the wages offered to employees. Walmart is the largest retail store and has employed 2.3 million workers. The firm has been facing compensation challenges such as low wages, unequal pay, and minimum contribution to employee benefits. On an industry scale, Walmart’s competitors have been encountering the same challenge. These competitor firms (Amazon and Target Stores) have increased their minimum wages to $15 and $13, respectively. Walmart still lags at $11. Another competitor, Costo, differs from Walmart, Amazon, and Target Stores on employees’ welfare. Costco is the highest-paying firm in the retail industry and exhibits low turnover as a result. The main solution to minimum wages is an increment to a sustainable level. On the same note, Walmart has, on several occasions, faced litigations as a result of gender-based discrimination against its workers. The retail store has been accused of paying lower wages to its female employees. Also, women are denied promotion opportunities, which are coupled with increased wages. The direct effect of low wages is low living standards. Others entail over-reliance on the government for essential services such as healthcare and social security. Increased government expenditure on these services results in increased taxes on the citizens. Minimum wage rates should be raised but with keen consideration of sustainability with regard to the firm’s profits. This increase should not manifest as an excuse for laying off employees from the corporation. Equally important, Walmart has been gradually increasing its wages, as in 2019, the wage rate was raised to $11. However, the increment does not match the wages offered by its competitors, such as Target Stores, with lesser profits.

References

Bose. N (2019). Target raises hourly minimum wage to $13, further topping Walmart’s $11. https://www.reuters.com/article/us-target-wages/target-raises-minimum-wage-to-13-an-hour-in-tight-labor-market-idUSKCN1RG1F9

Iannelli, J. (2019). Nearly 100 Women Sue Walmart for Gender-Pay Discrimination in Miami Court. Miami New Times. Retrieved from https://www.miaminewtimes.com/news/Walmart-sued-for-gender-pay-discrimination-by-100-women-in-miami-court-11077825

Lieber, C. (2019). Walmart just got hit with a major gender discrimination lawsuit. Vox. Retrieved from https://www.vox.com/the-goods/2019/2/15/18223752/Walmart-gender-discrimination-class-action-lawsuit-2019

Neumark, D., & Wascher, W. L. (2008). Minimum wages. MIT Press.

Parker, J., Arrowsmith, J., Fells, R., & Prowse, P. (2016). The living wage: concepts, contexts, and future concerns.

Perino., M (2019). Costco employees reveal how much they really make. Business Insider. Retrieved from https://www.pulse.com.gh/bi/strategy/costco-employees-reveal-how-much-they-really-make/ybd0x9t

U.S. EOCC (n.d.). Walmart to Pay $150,000 to Settle EEOC Age and Disability Discrimination Suit. Keller Store Manager Was Harassed and Fired Because of His Age and Denied Accommodation for His Diabetes, Federal Agency Charged. Retrieved from https://www.eeoc.gov/eeoc/newsroom/release/2-19-15.cfm

U.S. EOCC. (n.d). EEOC sues Wal-Mart for disability discrimination: Retailer Refused to Hire Amputee for a Stocker Position. Retrieved from https://www.eeoc.gov/eeoc/newsroom/release/9-24-18g.cfm

Walmart. (n.d.). About Us. Retrieved from https://corporate.walmart.com/our-story

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Walmart Compensation Scheme

BUS 681 Week 6 – Final Project – Directions

Final Project – Walmart

Walmart has so many compensation problems that there’s a wealth of information you can find on the Internet. Given the company’s global presence and number of issues, concentrate only on US operations to keep the paper manageable.

Some of their competitors are Target and Costco.  Link to Costco pay practices and business model:

https://www.compensationcafe.com/2014/10/thinking-deep-thoughts-about-costcos-pay-practices.html

Please make sure all eight credible sources are in English.

A Final Project is due the last class session.  The Final Project will contribute 30% to the course grade.

With instructor approval, students will select an organization that either has or is experiencing challenges with its compensation and benefit system. The student will provide a brief historical view of the organization. The student should assess the company’s current challenge, review other organizations that had a similar situation (and the strategy they devised to address the issue), explore theories and strategies that should be contemplated to address the situation, and finally, include a recommendation to management regarding how to address/resolve the situation. Importantly, the student should ensure any recommendations are based on solid research and analysis and reflect a comprehensive solution to the problem.

The Final Paper must include a minimum of eight credible sources (in addition to textbook). Research topics must be reviewed in advance with the instructor – Walmart has been approved.

Writing the Compensation and Benefits Paper
This essay must reflect what is considered the current “state of the art” systems, reflecting both academic and professional (practical) orientations. The Final Paper must be 8-10 double-spaced pages (not including the title and reference pages) and be formatted according to APA style guidelines. This paper may be written in first person. This Final Paper should review the available research, discuss the implications of that research for the topic area, and provide conclusions. The paper should be organized into the following areas (use section headings to organize your key points):

1. Introduction: The area of research should be described and the purpose of the research. That is, describe the topic area in terms of (a) its relationship to the topic and (b) what you want to be able to contribute to the training literature by writing this paper. Your introduction must include a succinct thesis statement.
2. Review of the literature: Students must provide a brief historical view of the organization and assess the company’s current challenges. This review will include an examination of other organizations with similar situations, including the strategies used to address their issues. Students need to explore theories and strategies that could address the situation. Identify any areas that may have not been addressed in the literature used for review.
   

   Walmart Compensation Scheme

3. Implications: Assess any implications. Organize the implications of the literature in a manner that logically builds the case for your recommendations. For each of your implications be sure to reference the literature related to that implication. Be sure to indicate whether the implication is one that has already been made in the literature or if this is one that is original to you through your own analysis.
4. Recommendations: Based on the research, students must make recommendations for a comprehensive solution to the problem. This is where you tie all the pieces together. Make sure your recommendations are organized in a logical order that synthesizes your major points relative to the purpose of your paper. Be sure that your recommendations are justified and have credible support. Inspire your audience to think about the practical application of your topic. Remember, this is the last thing you are leaving with your reader so make the context of your message clear, communicate the impact of your topic, and leave a lasting impression.
5. Conclusion: Be sure your conclusion summarizes your paper and explains how you have addressed the thesis statement.

Your paper should include:

• Must include a title page according to APA style.
• Must include an introductory paragraph with a succinct thesis statement.
• Must address the topic of the paper with critical thought and analysis.
• Must include section headings to organize your key points clearly.
• Must include citations to references that support the assertions made and facts presented in the paper.
• Must conclude a conclusion paragraph that ties directly back to your thesis statement.
• Must use APA style as outlined in the approved APA style guide to document all sources.
• Must include, on the final page, a reference list that is completed according to APA style as outlined in the approved APA style guide.

Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.