There’s a rising tide when it comes to pay plans, and it’s something all companies should be paying attention to. Last week, Wal-Mart announced that it would be increasing its pay to more than 500,000 of its employees to $9 per hour in April and to $10 per hour next year. That change alone will have a direct and immediate impact on the labor wage numbers that have lagged behind the job growth statistics of the past few years.
But, more importantly, what Wal-Mart’s pay strategy shift will do is begin to create a war for talent in the retail industry – as well as other sectors, for sure. You can already see it happening. TJX, the parent company of T.J. Maxx, Marshalls and HomeGoods, said this week that by next June it will pay all of its workers who have been employed for six months at least $10 an hour. This June, TJX plans to start paying all U.S. workers at least $9 an hour.
“We think it’s absolutely imperative that we keep pace and that we have the best talent,” said Carol Meyrowitz, TJX’s CEO. What Meyrowitz and the company know is that if they don’t do this, they’ll be losing good workers to the Wal-Marts of the world. In fact, on a conference call this week, she said that TJX needs to invest right now in worker compensation to help retain the best of their 191,000 employees.
And, there are other signs that the impact of these moves is reaching multiple economic sectors. In the retail world, Target said it will be evaluating its pay plans and Macy’s echoed a similar sentiment. Also, Starbucks raised its starting pay for workers last month. And, in the health care market, Aetna said last month that it would be raising the pay of its lowest-rung workers to $16 per hour by April of this year.
You can expect many similar announcements in the coming months from a variety of companies and economic sectors. It’s not enough right now to add new employees – you also have to pay them fairly. It’s not just a touchy-feely management thing, either. You think Wal-Mart, the king of low prices that will do anything possible to ensure it keeps its costs down, is making a change because it sounds good? No, they’re doing it because they know they’re at a competitive disadvantage when it comes to labor right now.
Very simply, employees are a bit more in the driver’s seat than they have been in recent years, as the job market for good workers has tightened. This is now driving companies to reevaluate their pay strategies and increase compensation if they expect to retain and attract great workers. That’s what Wal-Mart knows: they can’t continue to lowball staffers, otherwise those people will simply go across the street to a better-paying job.
And, that’s a position that every good company knows it needs to avoid. The message? Get your pay plans in shape now – before the wandering eyes of any good employee can take a look at what else is available. Because, with the way the tide of salaries is heading upward, there will probably be something more attractive.