Sometimes saving money actually costs you money.
If a homeowner chooses to patch their roof rather than replace it, that can ultimately prove more expensive. The same thing happens when someone decides to put duct tape over the check engine light instead of having the engine checked.
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In the business world, it can be tempting to spend less money because companies are judged by their quarterly results. That’s an idea Amazon (AMZN) – Get a free report has rejected by being willing to openly sacrifice short-term profits for long-term investments.
Relatively few companies do that, and one area where many companies make a mistake is in hiring. Filling a job at the lowest possible rate or even the prevailing rate for that type of job can lead to higher turnover, which costs the company money and hurts the experience of its consumers.
Walmart and Target, possibly Costco (COST) – Get a free report larger competitors, have increased salaries in recent years. It can be argued that this occurred due to social pressures and a shortage of workers. It’s kind of a mix of wanting to look like responsible employers who pay a living wage and market demands forcing increases anyway.
Costco, however, while it pinches pennies in most areas of its operations to reduce expenses so it can sell members’ items cheaper, has always viewed employees as an investment, not an expense.
That’s something members should appreciate, but workers who have been with the company for years are more likely to resolve their issues. It’s a strategy that Costco is proud of and that differentiates it from Walmart. (WMT) – Get a free reportAim (TGT) – Get a free reportand supermarket chains like Kroger (K.R.) – Get a free report and Publix.
Chief Financial Officer Richard Galanti discussed the company’s employee strategy during the warehouse club meeting. call for fourth quarter results.
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Image source: Xinhua/Ting Shen via Getty Images
Costco pays more than Walmart, Target and Kroger
Costco has earned a hard-fought reputation as a good place to work. Part of that comes from how you treat employees, and salaries play a big role in that.
“Well, first of all, we’ve always prided ourselves on offering the best hourly pay package out there: salaries, benefits, contributions and 401(k). I’m using US numbers here. But our US average “It’s 90% of our employees, like many large retailers, work hourly, and our average hourly wage is close to 26. It’s in the 25s,” Galanti said.
The company has also long recognized that salaries are only one part of the compensation package that will entice workers to stay for long periods.
“And that’s on top of a very rich health care plan, where the employee only pays about 11% or 12%, I think, and also a little less than that. And on top of that, we, regardless of what “an employee contributes to their 401(k), we contribute between 3% and 9% depending on years of service,” he added.
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Galanti believes his pay, the highest in the industry, helps the company retain workers.
“So, you have a 20-year-old cashier earning full time in his mid-60s, with another $4,000 or $5,000 contributed to his 401(k), with a very rich health care plan. So, “In our opinion, We are different from any other. Our pressure comes from ourselves,” he stated.
How Walmart, Target and Kroger Compare
Walmart shared a statement about its hourly wages on its website:
“We are continually investing in higher wages, and the average hourly wage for our frontline associates in the U.S. is more than $17.50. In recent years, we have introduced higher-paying positions in our stores, increased salaries of more than 1 million associate frontline employees and investing in clearer career paths that give associates more room to grow their pay as they build a career here,” the company shared.
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Target has a starting hourly wage that ranges from $15 to $24 depending on the job and market. The chain does not publicly share what the average hourly worker earns.
Kroger pays its hourly employees an average of $16 per hour, according to company statements.
