The Wal-Mart headline you probably missed


The world's largest retailer created quite a buzz last week, when it said it would raise the hourly pay for 500,000 employees to $9 an hour in April, followed by an hourly wage increase for current associates to $10 or more in February 2016.

Lost among these headlines, however, was news that could be even more significant for employees, as well as workers across the industry as a whole.

Employee Clara Martinez stocks the shelves at a Walmart store on Feb. 19, 2015, in Miami.
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Along with its decision to boost wages, the big-box store said it will offer fixed schedules to some of its associates each week, starting next year. It will also allow employees to sign up for open shifts on a first-come, first-serve basis, and continue to give workers their schedules at least two and a half weeks in advance.

Through these initiatives, experts said Wal-Mart is setting the tone for big changes to retail's employment structure, which could reduce turnover and thereby lower companies' recruiting and training costs. According to Hay Group management consulting firm, scheduling is the No.1 source of dissatisfaction among retail workers.

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"Wal-Mart's an industry mover and people look at what they do," said Charlie DeWitt, vice president of business development for Kronos workforce management firm. "If Wal-Mart says it's good business to invest in your employees, you've got to think that a lot of the rest of the retail industry's going to follow that lead."

Shift of power

Wal-Mart's push toward more flexibility, and more stability, for retail workers directly correlates to the improving labor market, said Ahu Yildirmaz, head of the ADP Research Institute. With the unemployment rate dipping to 5.7 percent in January, and wages that are slowly starting to tick higher, retail employees have more bargaining power than they did during and immediately following the recession, she said.

"Retailers have really understood that it's going to be really hard to compete on base salary," said Maryam Morse, senior principal and retail practice leader at Hay Group. "It's going to be hard to differentiate that way, so what are the things retailers can control?"

Giving employees more control over their schedules, as Wal-Mart is attempting to do by offering fixed schedules, is one option, Morse said.

Still, questions remain as to how the retailer will execute on this promise. Wal-Mart spokesman Kory Lundberg said the company has not yet determined how many workers will qualify for these schedules, though pilot locations are giving longer-term associates first dibs. He added that the number of opportunities for fixed schedules will vary by store and be partly based on volume.

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The big-box store will also continue its practice of giving workers their schedules at least two and a half weeks in advance—which is "very much on the cutting edge," Morse said. Typically, retail workers know their schedules about a week or so in advance, she said.

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Along with higher wages and its new training program, which Lundberg said is designed to give workers "clearly defined opportunities and choices to develop their career path," Hay predicts Wal-Mart's move will set the tone for the rest of the industry.

"They're hitting on as many of those levers as they can," she said.

Critics not satisfied

Wal-Mart's news, though met with enthusiasm by many, was also doused in heavy criticism by groups such as OUR Walmart. That organization, which campaigns for higher wages at the retailer, said that while it was pleased with to see a pay bump for the Wal-Mart employees, it still isn't enough.

"Especially without a guarantee of getting regular hours, this announcement still falls short of what American workers need to support our families," the organization said in a statement.

That argument is one of the key points raised by Wal-Mart's detractors, who say that pay raises are not sufficient when employees aren't scheduled for enough hours.

A recent study by the Retail Action Project, a group that advocates for workers, found that out of 236 retail employees surveyed, only 40 percent had set minimum hours each week. One-quarter of the respondents said they are scheduled for on-call shifts, and sometimes find out if they're needed only two hours in advance.

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Though it saves money for employers, this practice prevents part-time workers from potentially picking up extra hours at another job. It also makes it challenging for employees to be assured they will receive a steady income.

"Part-time workers need their employers to schedule them for enough hours so that they can earn enough to support themselves," said Janna Pea, spokesperson for the Retail Action Project.

"The bottom line is that even with this long overdue [pay] increase, the women and men who have made Wal-Mart so successful over the years are still struggling to support themselves and their families."

According to Lundberg, fewer than half of Wal-Mart workers are part-time, and none of its workers are on-call. As the largest private employer in the U.S., 1.2 million people work for its Wal-Mart U.S. unit.

Shift away from on-call

Though Kronos' Dewitt said there are still some situations where having on-call workers makes sense, he predicts more retailers will shift away from this practice, regardless of Wal-Mart's initiatives.

"What I suspect is happening in retail … is that retail managers or store managers see the variability in demand, they see the variability in people showing up and they're over-controlling," he said. "They're adding an extra shift when maybe they didn't need to add an extra shift."

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His firm conducted six studies across different types of retailers, ranging from big-box stores to fashion specialty shops. In every case except for pharmacy, where a heavy amount of business is driven by prescription pickups, retailers that cut employees or otherwise understaffed their stores lost out on same-store sales growth.

ADP's Yildirmaz added that as the labor market continues to tighten, retail workers will be much less tolerant of unsavory scheduling practices, and instead seek employment elsewhere. As a result, companies that don't compete on these measures stand to face challenges recruiting, and keeping, talent. That, too, will cut down on their bottom line.

"It's not only the hiring costs [businesses face]…. There's a learning curve for the new employees," she said. "You really have to look into how much productivity you're losing."