Wal-Mart Benefit Plan Analysis Wal-Mart Essay

  • Length: 15 pages
  • Sources: 6
  • Subject: Healthcare
  • Type: Essay
  • Paper: #59852544

Excerpt from Essay :

Wal-Mart is also deemed to be a company that greatly mistreats and discriminates against its employees but there has apparently been no reliable empirical data to back that up (Van Riper, 2008).

The article concludes by conceding to some Wal-Mart critics. First, Wal-Mart cites Ohio University professor Richard Vedder, who points out that Bureau of Labor Statistics Data holds that Wal-Mart's wage structure lags behind the retail sector as a whole (Van Riper, 2008)

Relative to what Wal-Mart pays its employee and the benefits they bestow, a third source was widely condemnatory of Wal-Mart and insisted that it could and should be paying its employees more…a lot more. The average associate at Wal-Mart, per this story, makes an average of not quite twelve dollars an hour. If annualized, that would be below the United States poverty line. The story's author insists that wages and benefits are not higher simply because Wal-Mart can get away with it and not because they have an inability to afford it (Blodget, 2012).

The author notes that if Wal-Mart took $7 billion of its 2011 operating profit and used it to give employee raises, the employees would no longer be below the poverty line on an annualized basis. However, their inability or unwillingness to do so has led to the increasing disparity between the rich and the poor that has been emblematic of the past few decades in the United States (Blodget, 2012).

Another story notes how Wal-Mart is actually taking a two-pronged approach to lower its employee benefit expenditures. It is commonly known that part time employees at Wal-Mart do not get health benefits any more. What is less well-known is that Wal-Mart is also concurrently increasing the proportion of part-time works that comprise Wal-Mart's workforce (Kim, 2011).

A final story about Wal-Mart talks about a few things touched upon throughout this report. The first is that there is good and bad behind Wal-Mart and the greater retail sphere. The good, as stated on this non-profit site, are immigrant rights movement, minimum wage increases, telecommuting options, executive accountability and recent favorable Supreme Court decisions. The bad includes hurricanes and their impacts, income inequality, decline of the auto and airline industries, mining disasters and loss of workplace privacy (WorkplaceFairness.org, 2012).

The site levels one statistic against Wal-Mart that is quite damning. It doesn't speak to the accuracy or legitimacy of the charges, but roughly five thousand workplace practices lawsuits are filed against Wal-Mart ever year. That comes out to roughly 17 per day. This site, like the Blodget story, says that insufficient benefit packages and paltry wages can surely be corrected by using at least some of the $11 billion in operating profit that was had one fiscal year (WorkplaceFairness.org, 2012).

This same site, specific to this discussion of health care, made note of the health care changes mentioned earlier in this report. It noted that not long after Wal-Mart revamped its benefit packages and touted the cost of $11 per pay period for one of them, they were ostensibly caught red-handed via an internal memo that simply wanted to reduce health care costs via methods like hiring more part time workers, reducing 401(k) contributions, putting health clinics in Wal-Mart stores and discouraging unhealthy people from working at Wal-Mart and that job descriptions should be manipulated to mandate the need to be able to engage in physical activities.

Issue Analysis

The overall issues are not hard to dissect. The first major issue is whether or how Wal-Mart can increase its health care benefits without sacrificing their competitive edge and ability to expand. While many people say that Wal-Mart's operating profit is a honey pot that should only go to the employees, there are significant dangers in being that simplistic. As noted in the Forbes story earlier, even with the lower wages and benefits, to say that the community or that Wal-Mart as a whole is worse off become of Wal-Mart would be specious.

The second issue is how Wal-Mart, regardless of its ensuing plans, is going to combat the open public derision levied towards them as a result of their perceived or verifiable employment practices. Indeed, there are some people that are anti-big box, anti-retail or anti-capitalism in general and no amount of kowtowing and capitulation is going to satiate them. However, this is not to say that Wal-Mart should treat their employees as an afterthought and treat concerns about their social responsibility as irrelevant.

The third issue is the prospect of how exactly Wal-Mart would have to react if it greatly increased its health care outlays only to befall economic struggle later. This is often pointed to as one of the major, if not the major, reason why GM, Ford and Chrysler had such massive problems over the last few decades. That being said, a growth in the employee benefit plan can be done at minimal cost and great benefit to all. It just has to be done in a way that makes sense, is based on real facts and not best guesses and is based on real industry practice and success.

Issue Solutions

One major solution for Wal-Mart would be to, once their overall implementation strategy is defined, to mount a public relations campaign that espouses and shows a commitment to their employees and their well-being. At a bare minimum, Wal-Mart should adjust their pay and benefits to match established retail standards applicable to both full-time and part-time employees. With part-time employees in particular, it is rather odd that part-time employees would expect expansive benefits given the low amount of hours they work, but there is actually a way to address that without being confronting about it.

Wal-Mart is actually hurting itself by using so many part-time employees. It would be wiser form them to reduce their overall headcount and use more full-time employees. It is true that full time employees cost a lot more and for a number of reasons, but the amount of savings to be had by greatly reducing the number of part time employees should far outstrip the costs borne of hiring more full time people.

One major reason that Wal-Mart would resist such a move, beyond the costs involved, is the fact that positions like cashiers and the like are very much a peak-time concern. Meaning, there are times where the front end of a Wal-Mart is pure and utter chaos while other times it is dead as a brick. Wal-Mart can address this concern by hiring people that would function both as department associates when the department managers are not there and these people can be called to the front as needed to cover registers when peak times hit. This would lead to the registers being sufficiently covered and the departments in the store would be zoned and taken care of.

This would translate to benefits in that Wal-Mart could easily increase benefits because less people are being hired and, thus, less people would need coverage. In addition, many employees would still find coverage from outside sources (e.g. spouses) so that would tend to keep Wal-Mart's outlays low as well. The reduction in headcount should also allow Wal-Mart to raise the average wage scale for all employees while keeping overall payroll outlays flat. The one downside is that employee headcount as a whole would drop and this would impact the community. However, providing expansive health care to 1.1 million employees, many of them part-time who would not be contributing monetarily anywhere close to what they would be receiving in return, is a non-starter. An employee working 24 hours a week does not (and should not) receive the same benefits as someone who works 40. It is not equitable and it is wholly against industry standards and that is not just retail that this applies to. Increasing pay for part time employees may be justified, but expansive benefit packages will not and should not happen.

Next, it should be openly explained and justified that much of Wal-Mart's profit is used to remodel and expand existing stores as well as opening new stores. As inferred elsewhere in this report, Wal-Mart cannot forsake its profit leverage just to placate social responsibility advocates who want to treat the chain like a collective or a commune rather than a business that needs to maximize its profits and answer to shareholders. That being said, just because costs can be lowered does not mean they should be. As such, benefits and pay should be maximized while not sacrificing the ability to further expand the Wal-Mart brand.

Solution and its Implementation

The changes to the part-time vs. full-time structure should not be done via mass firings and forced attrition. Instead, it should just be established that the emphasis going forward will be to hire full time employees rather than part time employees. For example, if two part time people leave from a department and they worked 20 hours/week each, the replacements should be a single…

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