Costco’s pay and perks set it apart from rivals
Costco was the only traditional retailer to make Glassdoor’s list of 2014’s Top 25 Companies for Compensation & Benefits, coming in second by a fraction of a point behind Google.
The rankings from the employer-review website were based on an anonymous online survey that asked employees to rate how satisfied they were with their pay and benefits on a scale of one to five.
Around pay, a cashier at Costco makes $15.20 an hour on average based on anonymous reviews provided by former and current Costco employees to Glassdoor. The cashier assistant (apparently the associate who helps bag) earns $11.85 on average.
In both cases, the pay is from 25 to 50 percent higher than Costco’s closest competitors. According to Glassdoor’s reviews, a cashier at Sam’s Club makes $9.37 an hour on average; B.J.’s, $8.58; Walmart, $8.54; and Target, $8.18.
According to a profile of Costco by Bloomberg Businessweek last year, Costco’s employees earn $20.89 on average an hour, excluding overtime. Glassdoor stats show that Costco’s supervisors across departments earn about $22.00 an hour with some on salary.
Costco’s starting pay is $11.50. Its CEO, Craig Jelinek, has loudly supported raising the minimum wage to $10.10.
But Allyson Willoughby, Glassdoor’s senior vice president of people, told SmartPlanet that Costco’s benefits and perks also stand out. Those include its generous health care plans, profit sharing and 401K plans, free Costco membership, and overtime pay and paid sick time for both full- and part-time employees.
One surprising perk frequently mentioned in Glassdoor’s reviews is time-and-a-half pay for working Sundays. Also mentioned is eight paid holidays for full-timers and part-timers with the stores closed seven of those days. Benefits for part-timers start after six months.
Related to pay, reviews noted that annual bonuses arrive when employees work five years. Ten-year employees earn $3,000 bonuses twice a year. Also praised by employees is flexible scheduling and guaranteed hours (25 for part-time and 40 for full-time).
EBay came in at 25 on Glassdoor’s list. Ms. Willoughby told SmartPlanet that H-E-B, Wegmans and H&M just missed the top-25 cutoff.
Costco also rated highest among retailers in Glassdoor’s 2014 Top-50 Best Places to Work list, at 14. Other retailers making that list included H E B, 27; Publix, 32; Starbucks, 39; Wegmans, 40; and eBay, 49.
Discussion Questions
Does Costco’s high employee satisfaction level stem more from its pay structures or benefits/perks? How much of a benefit does Costco gain from its strong reputation for pay and perks?
Comparing Costco’s pay and benefits to other discount retailers is like comparing major league baseball to minor league baseball. It’s by far two different classes of employee. Costco has a different business model of wanting to hire younger, fitter, quicker on their feet employees who will stick around for the long haul. The other retailers are often just looking for warm bodies to perhaps stay about 8 months and then move on down the line.
Sure Costco is all for raising the minimum wage. Costco doesn’t hire people in that class category so it doesn’t affect them, but it does hurt their competition. Both Costco and Walmart are paying a fair market wage for the quality of employee they hire. If minimum wage is increased too much, all retailers will need to move to a Costco business model. That could prove problematic for the less than ordinary employee that Walmart has built their empire on.
Costco’s high employee satisfaction is a function of the culture and company strategy. The Costco pay structure and benefits/perks go together and are integral to how they want to run their business and stand out from most retail companies. Both are equally important. The first gets associates in the door, the latter keeps them committed to the company.
Costco’s been able to differentiate itself in the communities it serves by seriously investing in their employees and providing consumers with high quality and value merchandise. These do translate to motivated employees, lower turnover, and a focus on serving the customer. This is how they compete and win.
Costco is making it clear to its staff that it respects them. They are well compensated vs. other retail employees and the company offers them benefits that are beyond requirements such as healthcare.
There have been studies to suggest that compensation is not typically the driver of employee satisfaction. But in the world of low wages for retail employees, Costco staff must feel especially satisfied.
It occurs to me that Costco’s partner relationships with providers of various services helps keep their costs in line. But nevertheless the C suite is looking out for employees and that says a lot and radiates good will.
As a Costco shopper this article offers a rationale for the positive attitude I encounter in the warehouses. But more importantly for me (and I venture to say for other consumers) it makes me feel good about Costco and encourages me to go there.
It has to be a combination of both, although pay structure is VERY important in the retail world. People working in retail positions are always searching for a better paid position and Costco must have many applicants for their opening when they occur. Once in the job, the benefits and bonus structure become a big part of why Costco has a very high retention rate compared to their competition.
There is more to their personnel success than the pay and benefits structure, however, as even though the buildings are always very busy, the employees are friendly and helpful and the long lines with large orders move briskly. This attention to customer service makes the job of the cashiers and their assistants better and it shows in how they interact with customers.
I don’t think it’s a case of either pay structure or benefits…it’s the combination of both along with a corporate culture that clearly values the contribution friendly and capable employees make to the overall Costco experience.
Like qualifying to wear the New York Yankees uniform back in its golden days, donning the Working Cloth of Costco today bolsters one’s pride along with better pay and perks.
Who but Costco offers retail associates such a warm and practical feeling? Nobody!
Employee satisfaction level stems not only from pay and benefits, but also from a fun working environment, strong promotion from within, respect for employees, and great hiring processes. The best way to solve your recruiting and staffing problem is to become a place where people want to work.
Costco has done well with the way they treat the workers, and it doesn’t hurt the fact that each store brings in about 1.5 million per week, which really helps the labor %. These workers bust their butts, or they don’t last long, as I have spoken to many over the years. Many of them are happy to be there, and they admit that they have very little down time, which is good for productivity.
The pay scale is far better than smaller retailers, and they can be picky who they choose, as applications to work there far exceed demand. Going beyond the pay scale, all employees in stores must be treated well, and have a say in how things get done. Kudos to Costco for running a tight ship, and making sure they retain their top associates.
Costco’s high employee satisfaction likely comes from the result of the later survey mentioned (Top 50 Places to Work) as much as it does from their wages and benefits.
Wages and benefits are one thing, but alone they are not enough to make that list. Quality of work life will always rank higher than wages and benefits. Associates that believe they are working at a great place to work, work like they are working at a great place to work.
Does Costco benefit from its reputation for pay and perks? I would say the benefit is from the outcome of that, as well as being a great place to work and that translates to a great customer facing experience. So is it the direct benefit from that reputation? Or, is it the outcome of it? You decide. But, you can’t necessarily have the outcome without the pay and perks. Nevertheless, Starbucks made it without it. However, companies like Zappos and Nordstrom, that have and incredible reputation for both, didn’t make either list.
Like all lists, it depends who you ask and it depends what you would like the outcome to be.
The job market is not good at all. Jobs that pay well are very scarce in today’s market economy. What people are looking for, when coming from unemployment, is full time employment at a livable pay rate with what benefits they can get. What employees are leaving their jobs for is better pay very closely followed by job security. Benefits and other tangibles are less important due to the lessening of what can affordably be offered by employers.
The reason for so many low paying jobs might be that the leadership of most companies are responsible for profitability alone and not for securing a productive long term employee population that will provide excellent work ethic and customer service to cause the company to grow in any economic condition. If that were the case, we would see a rapid change in where company turnover exists as well as the reasons for turnover.
It’s a combination of everything including corporate culture and consumer perception. Who doesn’t want to work at a good company?
These intangibles produce a halo effect that appeals to consumers and provides Costco forgiveness for long lines, packed parking lots, and other variables that hurt the reputation of other club retailers.
It stems from both, plus a business family style approach to keeping their employees happy, with great pay, great benefits, and an enjoyable work environment.