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Walmart's Internal Compensation Documents Reveal Systematic Limit On Advancement

By Alice Hines and Christina Wilkie
Posted: 11/16/2012 2:26 pm EST Updated: 11/16/2012 10:10 pm EST

Two years ago, when she started working at the deli counter of a Walmart in Illinois, Lisa hoped that her job would amount to the beginning of a career, one that would pay enough to cover her bills and enable her to stay current on her student loan debt.

But despite one raise since, Lisa, who asked that only her first name be used, now earns just $9.10 an hour, or about $13,000 a year on part-time hours. Seven months pregnant, she recently filed for bankruptcy. With no alternatives at hand, Walmart now seems like a dead-end to poverty, she says.

"I don’t have underwear without holes in them," she said. "Everyone at work wears T-shirts that are threadbare. I have just enough to eat and get gas to make it to work for the next two weeks."

Lisa's experience sheds light on why a group claiming to represent tens of thousands of Walmart workers nationwide is planning strikes and other labor actions at as many as 1,000 stores next week on Black Friday [ http://www.huffingtonpost.com/2012/11/15/walmart-strike-black-friday_n_2138871.html ], the biggest shopping day of the year. The actions are intended to protest what the group says are meager wages.

The company website declares that "a job at Walmart opens the door to a better life [ http://corporate.walmart.com/our-story/working-at-walmart/opportunity-benefits ]" and "the chance to grow and build a career." But interviews with 31 hourly workers and one former store manager reveal lives beset by paychecks too small to handle the bills, difficult to manage part-time schedules with hours subject to constant change, and little reason to hope for career advancement. Citing fear of losing their jobs, most spoke on the condition of anonymity.

The testimonials of these workers are confirmed by Walmart’s official compensation policy, an internal company document obtained by The Huffington Post, titled the "Field Non-Exempt Associate Pay Plan Fiscal Year 2013." The plan details a rigid pay structure for hourly employees that makes it difficult for most to rise much beyond poverty-level wages.

Low-level workers typically start near minimum wage, and have the potential to earn raises of 20 to 40 cents an hour through incremental promotions. Flawless performance merits a 60 cent raise per year under the policy, regardless of how much time an employee has worked for the company. [Click here to read the full pay policy [ http://big.assets.huffingtonpost.com/Walmart_0.pdf ].] As a result, a "solid performer" who starts at Walmart as a cart pusher making $8 an hour and receives one promotion, about the average rate, can expect to make $10.60 after working at the company for 6 years.

A Walmart corporate spokesman confirmed the existence of the compensation document. He said the company pays fair wages while providing substantial opportunities for motivated, hard-working people to work their way up to higher-paying jobs.

"In order for Walmart to attract good people we need to offer competitive wages and benefits, and we do," said Kory Lundberg, Walmart’s director of National Media Relations. "We offer pay and benefits that meet or exceed the majority of our competition in every location we operate, and that includes unionized competitors. We're clearly offering jobs that people want, because last year Walmart received more than 5 million applications to come work in our stores."

Most major retail chains that compete for customers with low prices pay relatively low wages to hourly workers. But as the largest private employer in the world, with 1.4 million workers in the United States alone, Walmart bears outsized influence on American working opportunities: It has largely set the standards for similar companies.

"In order to deal with competition from Walmart, other retail outlets have been forced into a reduction in wages and benefits across the board," said Ken Jacobs, chairman of the Center for Labor Research and Education at the University of California at Berkeley.

The 33-page compensation plan is written as an advisory document for company managers. Though it is addressed to Sam's Clubs -- a retail division of Walmart Stores Inc., that tends to attract slightly higher-income customers -- multiple Walmart employees confirmed that the plan applies to Walmart stores as well.

Initially devised to help standardize labor policies in response to costly lawsuits, Walmart’s pay plan has helped the company keep costs down by capping raises and regimenting employee movement within the company.

This formula has benefited company shareholders: Walmart’s profits rose 9 percent in the third quarter of 2012, to $3.64 billion, the company reported Thursday. Earlier this fall, the company’s stock hit a record high [ http://finance.yahoo.com/news/midday-movers-wmt-hrb-ocz-174137634.html ]. But the compensation structure for hourly workers helps explain why many rank-and-file workers carry a sense of grievance that they have been denied a share of the spoils.

"How could a multi-billiionaire company such as this only afford to hand out one 40-cent raise per year to employees while the ones in the top portion of the hierarchy are riding high starting with the six-figure store managers?" said Joe Lyon, a former sales associate at a Walmart in Sterling Heights, Mich.

The Walmart pay plan is organized around seven levels of job difficulty for hourly workers, called Position Pay Grades (PPGs), ranging from cart-pushers (Level 1) and cashiers (Level 3), to cake decorators (Level 4) and customer service managers (Level 6). Each subsequent pay grade offers 20 to 40 cents more than the previous level, according to the document. This means that the base rate of pay for a top hourly position at Walmart, like a check-out supervisor, is $1.70 more than that of the lowest paying job.

Walmart Internal Compensation Document [http://www.docstoc.com/docs/136187812/Walmart (embedded, scribd-style)]

Employees can receive annual raises for good performance, capped at 60 cents. Salaries can also go up when management decides to adjust a store’s base pay to meet market demands.

The plan applies only to the 200 to 300 hourly workers in a Sam’s Club or Walmart -- and not the handful of managers who are on salary.

A retired store manager at a Walmart in the Midwest said he made an annual salary of roughly $130,000 before retiring in the late 2000s, making him the store’s highest paid employee. But those those he hired at the lowest pay grade started just above minimum wage, he said.

"People don’t line up for those jobs," the former manager said. "You can make the same thing at a 7-Eleven or flipping burgers but you don’t have to work nearly as hard."

Promotions for hourly employees -- defined in the plan as moving up a pay grade - happen infrequently. Last year, 180,000 hourly associates were promoted, according to the company’s website [ http://news.walmart.com/walmart-facts ], or 18 percent of Walmart’s total number of U.S. hourly store associates.

Half of Walmart's one million hourly associates in the United States make less than $10 an hour, a spokesman told HuffPost in October. Many of those who make more than $10 an hour likely belong in another category offered by Walmart as an example of employee satisfaction: 300,000 employees have worked for the company for more than 10 years.

Walmart points to this contingent of workers as proof of its positive impact on the communities in which it operates -- not just by offering low prices, but also by providing steady jobs.

But some workers in this group describe their experiences in starkly different terms -- as a dispiriting slog through lean times, with little prospect for better.

"Most of our employees have been at our store a great many years, mostly older women who are fearful," said one associate. "They'll complain among themselves, but when it comes down to it, they would never do anything to jeopardize their jobs. They don't know anything else and need the pay."

Longtime workers are especially hard hit by another aspect of the hourly wage structure -- pay caps. Wages are capped at a certain level by grade, regardless of good performance.

A 40-year-old associate who has worked at Walmart almost half her life now earns $19.53 an hour -- a relatively hefty wage for an hourly employee, but also the most she can ever hope for, given that she has already hit the cap.

"After 19 years in retail, I guess what I make is ok," she said. "But if I stay with this company until I retire I could be making the same wage for the next 25 years."

Hourly employees are eligible for quarterly bonuses if their store exceeds profitability expectations. Eighty three percent of stores achieved that distinction in the spring of 2012, according to Walmart press releases, prompting the company to pay out $200 million in bonuses. Since the beginning of the year, in-store associates have received more than $550 million in quarterly incentive payouts, said Lundberg, the corporate spokesman.

But those interviewed said these bonuses -- between $100 and $500 every three months -- were so small that they made little difference in their lives.

Far more important, they said, was Walmart's insistence on keeping most hourly workers part-time, so as to avoid having to provide a variety of benefits available to full-time employees.

The retired store manager said that 70 percent of the workers at his outlet were part-time, meaning they worked no more than 32 hours a week. That ratio was imposed by his bosses at Walmart’s Bentonville, Ark., headquarters, he said, as a means of saving costs on benefits such as medical insurance, which are more easily accessible to full-time workers.

In many ways, the rigid pay model fits into a larger strategy pioneered by Walmart over the past decade to limit costs by streamlining store operations using technology and sophisticated data analytics. But the pay grades were also developed as a response to a landmark class action lawsuit, Dukes v. Walmart Stores Inc., which accused the company of discriminating against women in pay and promotion, according to Brad Seligman, a lead plaintiff's attorney in the suit.

That case was thrown out by the Supreme Court in 2011, after Walmart successfully argued that any discrimination that may have occurred was the fault of individual managers, not company policy.

"Before [Dukes], there were no objective standards for making pay decisions," said Seligman. The pay grades were first implemented in 2004, according to Seligman, the same year the women were granted status as a class [ http://www.reuters.com/article/2011/03/22/us-walmart-lawsuit-timeline-trib-idUSTRE72L7E520110322 ]. In 2006, Walmart established the pay caps. Both policies "may have reduced the use of subjective decision- making of individual managers," Seligman said.

The retired store manager, who was working when the new policies went into effect, said pay grades and caps made the compensation system more transparent and fair for all employees by denying store managers of the opportunity to reward their favorites with higher wages while shortchanging those meriting more. But the new system also produced another effect, according to some Walmart workers: Those who previously made higher wages quickly became targets for elimination and replacement by lower-wage workers.

"In my store, all of those people making more money got transferred to overnight shifts," said the retired store manager. "They found ways to get rid of them. So they thinned out pretty quick."

Overall, he added, "people make less money now."

Walmart often points to managers as examples of what can be attained within the vast company, highlighting how minimum wage-earning associates can reasonably aspire to six-figure careers.

"Nearly three-quarters of our store management teams started out in hourly positions," a spokesman told The Huffington Post in October.

But the ratio of salaried positions to hourly ones is small. At the retired manager’s store, about 200 hourly associates reported to a handful of salaried managers. Few can reasonably expect to secure middle class salaries, according to the workers, making prospects more like a lottery than a reliable career path.

Walmart’s hourly workers are far more likely to wind up like the 30-year-old sales associate in Mississippi who told HuffPost he makes just $8.65 an hour after three years with the company.

The sole breadwinner for his family of five, the worker, who requested anonymity, said he relies on food stamps, "not by choice and not without personal resistance."

Nevertheless, he loves his job. "I believe in Sam Walton's mission of service to the customer and that's why I continue to work."

The associate said he is scheduled to work a five and a half hour shift Thanksgiving morning, with another that evening, "just under the six [hours] that require a meal break."

Copyright © 2012 TheHuffingtonPost.com, Inc.

http://www.huffingtonpost.com/2012/11/16/walmarts-internal-compensation-plan_n_2145086.html [with embedded video report, and comments]

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