The Compensation Crisis in Walmart

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Pay Equity

Wal-Mart entry-level female employees face discrimination which means that the earn is not equally to the skills they do have. Sexism is an issue because it creates a high turnover, reduces employees’ moral, and loses productivity. The large amount of competition in supermarket industry makes importance of human resource management. The existing of the pay equity issue may cause the overall quality of female employee’s performance decline. As a result, Wal-Mart’s market share has a high probability of shrinkage.

Wal-Mart pay women less than men when the women have the same amount of compensable factor, especially with hourly employee at lower level. According to the Bureau of Labor Statistics (2012), there were 4.6 million people working in retail sales in the US, women make up less than half of all retail workers (48.7%), but they make up 55.4% of retail's low-wage workers. On average they are paid $10.58 an hour, compared to $14.62 paid to men. Partly as a result of female’s lower wages, 1.3 million women working in retail live at or near the poverty line based on THEGUARDIAN statistics (2014). These lower level hourly employees mainly consist of store cashiers, associates, and stock people. Furthermore, Wal-Mart faces the largest class action gender discrimination lawsuit in U.S. history — 1.5 million female employees accused Wal-Mart of discrimination in promotions, pay and job assignments. (Reed, 2013). The unequal paid between men and women causes significant effects of Wal-Mart since the lower level position faces directly with customer. On one hand, victims of gender discrimination lose motivation and morale which are necessary to perform their jobs effectively. It also prevent female employee to provide the first-rate service to customers because of the shorter productive period they have. Hence, the customers quit Wal-Mart market immediately due to the unsatisfied service they receiving. On another hand, the rate of turnover is high once female perceives that sex discrimination existing in their working environment. Consequently, Wal-Mart incur a greatly portion of cost with recruit and training new employees.

Recommendation

Low Wage Stragies

Walmart should increase their entry level workers’s salary to at least the LICF line. This will guarantee their employees live in a higher living standard and can afford to raise a family. Employees will be more satisfied with their work and thus increase productivity. The risk associated with this recommendation is higher cost for Walmart. In order to still obtain the low cost strategy, Walmart should try to use more variable compensation plan than fix salary to lower their fixed cost. They should pay managers base on their performance. Their base compensation of managers should be lower than before. To motivate their performance and link their performance to company’s low cost strategy, Walmart can use gainsharing method to share the gain of lower cost with managers if manager can lower cost for Walmart for targeted level, given that they are not pressing entry-level workers’ wage. The benefit associated with the recommendation is it will reduce turnover in entry-level workers, cost related to recruit new employees and training new employees decreases. The public image of Walmart is more positive and sales may go up and Walmart can generate more revenue. However, there is risk relate with discontent of salary change among managers. To deal with the problem, Walmart should communicate the new policy to managers effectively. Also, to evaluate entry level workers wage more precisely, Walmart should use multiple approach. First, categorize entry level employees in to different groups base on their work feature. Then use point method to identify compensable factors and give compensation base on their ranks. This can decrease the gap between entry-level and higher-level workers.

Pay Equity Strategies

To avoid any pay equity issue in the work place, Wal-Mart need to put its effort in the process of determinating the pay rate so that it’s meaningful and fair to every employee.

In stage I, evaluate the requirements of the job position and figure out whether any difference between men and women. For example, Is a man give more value to the organization than a woman as a cashier? If yes, specify the reason that causing any pay rate difference in the policy. In stage II, conduct ability test so that reveal employee’s potential contribution in real working position. The test consist the compensable components of the specific job position, such as skill, effort, responsibility and working condition. The scores employees get on the test may largely relate to the basic pay rate they received in the future. In stage III, reevaluate employee’s effort and contribution quarterly based on pre-determined measurement method. For example, to what extent the satisfaction level of customer service improve? Any productivity gains or achievements he/she make? Adequate assessment of contribution is significant while avoiding any legal issue. In stage IV, reveal the information/result of the test about the pay rate at the written employment offer. Update the contribution assessment report quarterly and specify any change of the pay rate.

Conclusion

After go through the company overview and analyzing the strengths, weaknesses, opportunities and threats for Wal-Mart. We conclude that the company is facing two compensation issues, which entry-level workers suffer from pay equity and low wage. As a result, Wal-Mart has a high employee turnover and give rise to extra financial cost for training new employees. Supported by analysis, we offer the following recommendations:

- Decrease manager’s base compensation and apply gainsharing method so that the company can keep a reasonable balance payment between manager and entry-level workers.

- Use point method to evaluate entry-level workers’ wage

- Use three stages to estimate the pay rate to avoid pay equity issue

These three suggestions are cost-efficient and feasible to Wal-Mart Human Resource to solve the current issues.