Wal-Mart Changes Compensation Plan
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?
- Wal-Mart replaces profit-sharing with retirement plan contributions – The
Associated Press/USA Today
- Wal-Mart to End Employee Profit-Sharing in February – Bloomberg News
- Wal-Mart to End Profit-Sharing in Benefits Switch – Reuters/ABC News