Wal-Mart pay caps draw mixed reaction

BENTONVILLE, Ark. — A dozen years into a Wal-Mart career, Brad Moore looked forward to earning more money based on his good annual performance reviews. That changed last week when the retailer announced chain-wide pay caps it says are intended to move people up the company ladder.

Moore’s wife Shannon senses an opportunity lost. Speaking for her husband because he is deaf, Shannon Moore told the Associated Press that her husband, 38, had applied for a transfer to a better-paying job at another Wal-Mart. The new pay caps took effect first, meaning he would lose about a dollar an hour from the $16.72 he now earns.

“We’re upset because you think you’ve got a plan going, next year’s going to be a little bit better and you can start paying for things. And then you get this,” said Shannon, 33, a preschool deaf education teacher. “We feel like a door’s been slammed in our face.”

For the first time since Sam Walton founded Wal-Mart Stores Inc. in 1962, the company last week said it would limit what it pays its workers, whom it calls associates. Wal-Mart says the policy brings the world’s largest retailer in line with other big retailers.

Wal-Mart announced the caps Aug. 7 without disclosing specifics, saying details would help competitors. Their aim is to keep the company competitive, encourage workers to move up and ensure consistency in what it pays for the same job in the same store.

The Hay Group, a management consultancy that helped Wal-Mart make the change, said most big retailers already have similar caps. Management professor Peter Cappelli from the University of Pennsylvania’s Wharton School said caps are not unusual in retail and other sectors.

“Firms adjust their compensation packages all the time. The big reason that they might decide to lower the top of the range is that they decide that they’re not actually adding much value once you’ve been there for a long time,” Cappelli said.

A Wal-Mart memo obtained by the Associated Press last October said costs of wages, profit-sharing and retirement programs were rising in part because of increasing worker tenure.

“Given the impact of tenure on wages and benefits, the cost of an Associate with 7 years of tenure is almost 55 percent more than the cost of an Associate with 1 year of tenure, yet there is no difference in his or her productivity,” said the memo written by Susan Chambers, then executive vice president of benefits.