Human Resource Management
Introduction
This project alludes to the compensation and benefit strategy of an organization. It is very essential to clarify the concept and all the aspects of compensation and benefits given to the employees of an organization. Walmart is the world’s largest retail store that has been taken for this project to study the compensation and benefits issues and the steps taken by them. As per the Fortune global 500, Walmart is also one of the largest companies in the world in term of revenues, and the leading private employers worldwide. It employs approximately 2.2 million employees across the world and 1.3 million people in the United States only. Walmart has confronted with the lawsuits in respect of their human resource. These issues include low wage rate, deprived working conditions, unsatisfied health care, etc. The employment and benefits policies of Walmart have come under the examination from the critics and government bodies in the US compared to other companies.
Compensation & Benefits
The term Compensation refers to the payment to the employees in return to their labor or job in the organization. Generally, Organization relates the compensation ranges with job profile and responsibilities. (The national institute of Business management, 2006 ) Compensation is categorized into direct financial, indirect financial and non- financial compensation. Direct financial compensation consist the basic pay, wages, bonus and commission that are provided at regular intervals to the employees. Indirect financial compensation includes all monetary rewards, but they do not include direct financial compensation, such as leaves, retirement policies, education and other benefits. Non- financial compensation is related to career development, progression opportunities, recognition opportunities along with the work environment and condition.( Williams, 1999; Bergmann and Scarpello, 2008)
Employee Benefits
Employee benefits mean the health and life insurance, accident and disability insurance, employee stock ownership schemes. Employee benefits may also be divided into direct and indirect benefits Direct benefits are not mandatory, these are the non wage compensation given to the employees additionally to their basic pay. These sort of employee benefits consist health, life, disability and dental insurance, retirement plans, day care, vacations, maternity leave education funding, tuition repayment.( World at Work , 2007)
Indirect benefits vary as per the organization. Indirect benefits define the organization’s culture and the whole compensation rewards programme. These benefits should be aligned with the organization objectives. Organization’s choice of indirect benefits can retain the highly skilled and experienced employees in the organization in the long run. (Beam & McFadden, 1998)
Walmart Introduction
Wal-Mart is an American Multinational corporation, headquartered in Bentonville. It manages a large chain of retail department and warehouse stores. Sam Walton founded the company in 1962 and incorporated in the year 1969. Presently, Walmart’s retail stores are11000 locating in 27 countries under 71 diverse banners (Daniel, 2010) along with the 11 e-commerce websites running in 11 countries. (walmart, 2014)
Walmart’s Compensation and Benefit challenges
In the same way, Wal-Mart also faced the criticism of the individuals, media, labor unions, etc. Along with the racial and gender discrimination issues, Walmart’ HR policies and practices also are protested by these groups. (Kabel , 2006; Jeff, 2005). According to the critics, the high turnover of Walmart indicates its discontented work force. According to the PBS-Store, nearly 70% of Walmart employees switch within in a year. In spite of high employee turnover, company is still hiring the employees at a low employment rate. The same study reveals that On average, the Walmart employee gets $250 /week and pay for full time employees is approximately $6 - $7.50 /hour ranging 28 to 40 hours in a week, that is assumed to be typical for the retail industry. This salary structure makes the employees under the category of below poverty line and children of Walmart employees may qualify for the free lunch scheme at the schools. (PBS, 2014)
Walmart Health Insurance Issue
In light of the several criticisms of Walmart such as low wages, very less compensation for accidental victim, race and gender discrimination issues and etc. its Health insurance issue is one among them. In the year 2005, the health insurance of Walmart covered approximately 44% of its 1.3 million employees In the U.S. (Bernstein, 2005) In retail industry the average for spending on health care plan is $ 4800, being a largest retailer in the world, Walmart spent only $3500 on its employees for health care that is 27% less. (Bernard, Jr.; Zimmerman, 2003) According to Cascio (2006), due to the less pay given by Walmart, employees cannot afford their health insurance plan. Publicly, Walmart shows its keen interest on employee benefits, but in reality organization was not concerned with the employee benefits since they were contemplating to trim down the full time and long term workers and discouraged the unhealthy employees from working at the company.
Walmart Strategies
Walmart claims that it provides comprehensive benefits that render better cash up fronts for making them eligible for medical expenses and gives opportunities to attain more income from its bonus and incentive program even with the high incentives plan employees can make arrangements for retirement. (Walmart, 2014)
The less offering and investment by Walmart always been the news for the media so Walmart So in Walmart adopted a strategy in 2005 and sent an internal memo to its board of directors advising that health care expenses may be diminished over $ 1 billion by 2011 by hiring the young and healthy workforce by enforcing them with education benefits (Martin, 2008) Further, this memo also suggested that replacing full time employees with part time workers will save the health insurance expenses because and other laws to be followed by Walmart in case of full time employees.
But in the year 2006, Walmart agreed to offer the health care insurance to its part time employees after his one year of job tenure, this tenure was 2 years reduced to 1 year for the sake of employees. There was one condition with this scheme that after deducting $1000 this profit may be gained. Walmart estimated and declared that this benefit will cover 150,000 more employees to health insurance cover if the eligible employees take part. And in the year 2007, under the health care plans, the percentage of covered employees increased by 8%, the introduction of cheaper insurance policies was also a reason for this surge. (BARBARO and ABELSON. 2007)
Walmart always responded for the benefits of the employees, as per the critics, Walmart health care benefits cannot be afforded by low income workers and in response to this Walmart introduced cheap health care plans that may allow the employee to take the benefits of health insurance with $11 premium in a month (Barbaro &Abelson, 2007)
Walmart’s competitor, Costco Strategies for Health care benefits
Costco is the main competitor of Walmart that covered 88% of its employees under its sponsored health insurance (Costco, 2104 ) After curtailing the investment on health care plan by Walmart , Costco has announced that it will not trim down any health care benefits for its employees in the near future in spite of rapidly increasing the health care cost. Because the company do not want any suffering for their workers ((Nolan, 2013; Cascio, 2006) Further, they have also declared that they will not cut a bunch of individuals out of the health cover. (Berman, 2014) Costco is known for the most competitive benefits packages in this industry. Costco offers their health care plan for full time employees after 90 days, part time employees after 180 days and to the salaried employees after the date of joining. Even company gives the options for choosing their own plan. It provides online access to its employees to check their claim status and other information. Costco employees are satisfied with the organization culture, environment and salaries.
Recommendation
Walmart must focus on satisfying its workforce, since its public image is being deteriorated by these issues.. Being a largest company in the world in terms of revenue, it can easily afford some extra cost for its employees. Employees are known as the valuable assets of the company. In each company, these policies and strategies are applied in different ways (porter, 1996) It should focus on its conservative pay structure and replace its compensation and benefits strategies. According to Bergmann and Scarpello (2008), the company should adopt the two-tiered pay system that should be individualized based plus extra pay for accomplishment, it will motivate the employee that they can earn more if they perform better.
Generally, employees of Walmart are satisfied with the pay but not with a high deductible for the health insurance cover. This satisfaction fluctuates by benefits and by sub division of employees. If increasing the amount of health care is really a typical and costly task, then Walmart should think to give other benefits to its employees such as paid time off. Supportive organization culture may help to solve this problem and improve the image of Walmart in the eyes of employees. It should realign the health insurance eligibility criteria, moreover decreasing the cross subsidization for family, giving them information for using the healthcare services and insurance, offering them best care management programs and adding more health clinics may be beneficial for the company. These recommendations will balance the cost; improve employee satisfaction and public image. Walmart has offered health saving accounts to its employees so it can shift all the employees to “progressively designed” customer driven health schemes to aid control cost patterns.
Restructuring the retirement plans for reducing the cost and assisting in saving the money for their retirement, redesigning the benefits package and making the strategic investments in the health care will be beneficial for the company. Walmart must strengthen the communication channel and convey the benefits schemes so that they may get more credit for the long term.
Impediments for Strategy
If company will begin offering the health care plan to its entire workforce, it will increase the cost to the company and will lead to increased cost of production and it will affect the prices of the products sold by the Walmart. Walmart makes available its products at low cost prices. So if it offers the more benefits and basic pay to the employees, Walmart ‘s product prices will be high and if not, then the Walmart employees will not be satisfied. Further, Walmart should display all its benefits and incentive program publicly, since the public image of the company has been affected by some issue that have been already discussed above.
Conclusion
Walmart has reached the point of being sound established in terms of revenue, market capitalization and providing utmost satisfaction to its consumers. However, it is lagging behind in respect of employee satisfaction only. Realigning the compensation and benefits strategy will be worked as a key driver for Walmart and side by side company can maintain the benefit spends by deciding the fixed percentage of revenue. All these strategies will be proved successful for poisoning the Walmart to fight with its critics.
References
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