In a Feb. 12 e-mail to other executives, Wal-Mart’s vice president of finance and logistics Jerry Murray wrote that “February MTD (month to date) sales are a total disaster. The worst start to a month I have seen in my 7 years with the company.”
Now, Reuters is reporting that Wal-Mart’s woes are persisting. In recent months,Wal-Mart Stores Inc has been hiring only temporary workers at many of its U.S. stores, the first time the world’s largest retailer has done so outside of the holiday shopping season.
A Reuters survey of 52 stores run by Wal-Mart in the past month, including one in every U.S. state, showed that 27 were hiring only temps, 20 were hiring a combination of regular full, part-time and temp jobs, and 5 were not hiring at all. The survey was based on interviews with managers, sales staff and human resource department employees at the stores.
Wal-Mart spokesman David Tovar said that the new hiring policy is to ensure “we are staffed appropriately,” when the stores are busiest and is not a cost-cutting move. Temporary workers are paid the same starting pay as other workers, but using temps enables the company to have adequate staff on busy weeknights and weekends without having to hire additional full-time staff.
Tovar admitted that before 2013, only 1-2% of the company’s U.S. workforce were temps (or what Wal-Mart internally calls “flexible associates”). Now, the percentage of temps has risen to about .
The hiring strategy could save Wal-Mart money by trimming labor costs at a time when its margins remain under pressure. Many consumers are still struggling given a high jobless rate and lack of income growth, leaving retailers of everyday goods with little pricing power, according to other company CEOs and benefits experts. Competition from dollar stores, other big box discount chains and grocery stores is also intense.
It also could set an example for some other companies as they look for ways to cushion themselves from a potential rise in healthcare costs next year as a result of Obamacare, according industry experts and retail executives. Denying that the temp-hiring move was related to Obamacare, Tovar nevertheless acknowledged that it could take a year or more for temporary workers to receive health care benefits.
Wal-Mart’s U.S. staffing has remained relatively flat even as more stores have opened in recent years. At the end of fiscal 2013, Wal-Mart had “more than 1.3 million” workers in the United States, the majority of them at 4,005 WalmartU.S. stores, compared with “approximately 1.4 million” workers in the United States at the end of fiscal 2009, the majority of them at 3,656 Walmart U.S. stores, according to the company’s annual filings for both years.
The temporary workers are often being hired on 180-day contracts, according to the survey of Wal-Mart stores. Temp workers typically have a completion date after which they have to reapply for work, but part-time employees work fewer hours than full-time workers indefinitely.
“Full-time people are getting slimmer and slimmer,” said a supervisor at a store in North Carolina, who asked not to be named, as did other store-level employees who were interviewed for this story, because she is not authorized to talk to the media. She said that the five new employees hired this year at the store are all temps and hours of existing employees are being cut.
A store manager in Alaska, who asked not to be identified, also said that “Everybody who comes through the door I hire as a temporary associate. It’s a company direction at the present time.”
Mary Pat Tifft, a member of the Organization United for Respect at Walmart, or OUR Walmart, a group of current and former Walmart employees campaigning for better wages, hours and benefits, said, “Long-term associates are particularly distraught by this short-term hiring as many are looking for more hours and full-time work. OUR Walmart does not define itself as a union but it does require its members to pay $5 monthly dues and is part of the United Food and Commercial Workers International Union.
Labor market experts said that the relatively high U.S. unemployment rate, which was an official 7.6% in May, and the large number of people not counted because they have left the labor force at least temporarily, does give companies like Wal-Mart the conditions to attract temp workers. National Retail Federation’s healthcare lobbyist Neil Trautwein said that hiring temps is “one strategy” that retailers could use to mitigate the potential rise in healthcare costs due to the Obamacare.
Wal-Mart already has begun to change the healthcare plans it provides workers. Last November, it said that newly hired part-time employees would have to work a minimum of 30 hours a week, up from 24 hours previously, before they can qualify for health coverage. Its U.S. employees also faced an 8-36% increase in premiums in 2013, prompting some workers to forego insurance. The majority of eligible employees at Wal-Mart sign up for the company’s health insurance.
Under Obamacare, large companies like Wal-Mart must next year offer healthcare to 95% of employees who work more than 30 hours a week or pay a penalty of $2,000 per worker for the entire workforce. When the work hours are so variable that the employer is not certain whether an employee qualifies, they can elect to determine eligibility by measuring hours during a period of up to 12 months, a strategy used by Wal-Mart. As a result, Wal-Mart’s temp workers may have to wait a year – provided they are still employed at the company – to find out if they are eligible. By that time, however, the temp may have been fired, which means some temps never get health coverage.
Financial institutions are firing staff at almost the same rate in 2013 as they did in 2009 (source):
Dr. Eowyn is the Editor of Fellowship of the Minds and a regular contributor to The D.C. Clothesline.