When the employee attrition rate increases for companies with high turnover costs, one of the many changes they can implement is a modification in compensation. This could involve simply increasing the base salary or altering the pay mix strategy.
The pay mix refers to the combination of different types of compensation that make up an employee’s total pay package, including base salary, bonuses, commissions, stock options, and other benefits. It is sometimes simplified by looking at the ratio of fixed pay to variable pay within the total compensation.
At the start of 2024, Walmart introduced a new compensation plan to improve manager retention, reduce turnover, and enhance engagement. The base salary was increased from $117,000 to $128,000, in addition to providing annual stock grants of up to $20,000 per year.
The new bonus structure allows managers to earn up to 200% of their base salary, meaning the highest possible salary for a manager can now reach around $500,000. The calculation for bonuses has also changed, with an ongoing evaluation of sales, but the profit generated by a manager’s store will play a bigger role, incentivizing leaders to improve performance.
The primary reason behind this change was that the attrition of store managers is costly for Walmart due to the complexity of their role, which relies heavily on institutional knowledge. Additionally, Walmart has been attracting higher-income consumers, and part of their attraction pillars includes keeping fresh produce appealing, shelves stocked, and aisles clean, where a noticeable difference is observed with motivated managers. A new bonus program was also announced for full- and part-time store staff to ensure that every level within the store can earn more than just an hourly wage.
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