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No Surprise: Higher Pay Helps Attract, Retain Employees

5 min read

In order to remain competitive with other retailers, Wal-Mart Stores Inc. announced early last year that it was going to start paying its workers at least $9 an hour and raise the minimum to $10 this year.

At the time of the announcement, a number of the Bentonville retailer’s competitors were already paying at least $9 per hour, and in some cases more. Turnover was becoming an issue for Wal-Mart as workers left for higher-paying jobs.

The increase in pay and improved training for workers, though, has paid off for the retailer, said spokesman Kory Lundberg. The stores are performing better on a number of metrics, including same-store sales and customer traffic.

“This is a journey, and there’s still a lot more work to be done,” he said. “But we feel like we’re on the right path.”

Wal-Mart certainly wasn’t alone in losing workers to companies that pay better.

All industries, from health care to manufacturing, have faced a shortage of workers, said Kathy Deck, director of the Center for Business & Economic Research at the Sam M. Walton School of Business at the University of Arkansas.

Deck said that increasing pay would be the first action she would suggest when companies can’t find the right workers to fill positions. “I’m going to say compensation matters a great deal,” she said. Workers start searching the job boards if they feel that they can’t get paid more at their current company, she said.

Kara Simmons, vice president of the staffing division at The Hughes Agency of North Little Rock, agreed that companies may need to raise their pay to attract qualified candidates. Simmons said currently there’s a demand for industrial workers, such as machine operators, welders and forklift operators. But some companies are willing to pay only $8.50-$9 per hour for those positions, she said — at or barely above the state minimum wage.

“And we have to give them that pep talk of, ‘OK, you get what you pay for,’” she said.

In addition, the labor market is tight in Arkansas. For September, the latest data available, the statewide unemployment rate was 4 percent, while it was 5 percent in the nation, according to the Arkansas Department of Workforce Services.

In northwest Arkansas, the unemployment rate is less than 3 percent. “There aren’t lines and lines of unemployed people waiting to take those jobs,” Deck said. “And so this should be the time economically when we see employers under pressure to raise wages.”

When the companies raise their employee wages, they “absolutely” find better workers and keep the workers they have, Simmons said.

TJX Cos. of Framingham, Massachusetts, which operates T.J. Maxx and Marshalls stores, raised its minimum wage to $9 an hour in 2015. And workers who have been with the company for at least six months began earning at least $10 an hour this year.

“We believe our wage initiative has been well received and is helping us attract and retain talented store associates,” TJX spokeswoman Erika Tower said in an email statement to Arkansas Business.

Still, Deck said that she has heard from employers in the region that are handcuffed on raising workers’ pay. Those companies are part of national chains, which won’t let the Arkansas managers raise pay for their workers.

“That exacerbates the problem with turnover,” she said. “And it makes it very difficult for them to attract folks who are going to stay for any length of time, particularly when you do find very large companies like Wal-Mart increasing pay.”

For the jobs that are available, the potential candidate isn’t going to take one that represents a pay cut from unemployment benefits, Simmons said. Or workers would prefer to stick it out at unsatisfactory jobs rather than take otherwise more fulfilling jobs that pay less. “Money has a strong influence,” Simmons said.

While money is an important element, it’s not the only way to attract and retain workers, said Ellen Davis, senior vice president of the National Retail Federation, a trade association. Retailers also are looking at ways to improve the training and education of employees.

Those efforts should show up on the bottom line. “They’ll either help you because it’s reducing turnover, or it will help you because it’s increased sales in your store because customers are having a better experience,” Davis said.

Wal-Mart’s Finding
With about 1.5 million workers in the United States, Wal-Mart is the country’s top private employer.

But in 2014, Wal-Mart was coming under attack by unions over its worker pay. Making matters worse, its same-store sales numbers in the United States were flat at best. Same-store sales are considered a key retail metric because they offer a comparison unaffected by new store openings.

Lundberg, the Wal-Mart spokesman, said coming up with a strategy to improve U.S. sales included quizzing some 23,000 employees about what they wanted from their employer. The top answers were higher pay, more consistency in scheduling and better training. Wal-Mart decided to spend $2.7 billion on its domestic workforce to target those areas.

In addition to the increase in pay, Wal-Mart made adjustments in scheduling and broadened training.

Wal-Mart has opened three training academies for department managers and will have 200 across the country by the middle of next year, Lundberg said.

The training academies are two-week programs that teach managers about retail and their departments. So far, 8,000 people have graduated.

The entry-level employee also receives more training. “They are being exposed to understand where they could go from an entry-level job to wherever they’d like to go at Wal-Mart,” Lundberg said. “That’s been something that’s been very successful as well, to help people see that there is a path for a career at Wal-Mart.”

In about 650 of Wal-Mart’s Neighborhood Markets, the company is testing a program giving the employees the same hours and days every week.

The initiatives have helped in Wal-Mart’s recent success, Lundberg said.

Walmart U.S. has had eight straight quarters of positive same-store sales. For the fiscal year that ended in January, same-store sales at Wal-Mart’s U.S. stores increased 1.2 percent over the previous year.

In September, Wal-Mart said 99 percent of stores received performance bonuses based on how well they performed. The company paid out more than $201 million in bonuses.

In September 2014, only 76 percent of the stores received performance bonuses, resulting in $128 million being paid out.

With the programs, Wal-Mart has created “the right type of work environment,” Lundberg said. “We think we really make a difference for both our associates and our customers.”

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