Wal-Mart tags $700 million of tax benefits to boost employee pay, cash bonuses

by Kim Souza ([email protected]) 1,316 views 

Walmart U.S. employees work to fill orders placed online for store pickup.

Wal-Mart stores joins a growing list of companies from AT&T to Home Depot applying some of its tax benefits from the new tax reform bill signed by President Donald Trump late last year to expand employee benefits.

The retail giant said Thursday (Jan. 11) it will raise starting wages to $11 from $10 an hour, an investment of roughly $300 million. Employees will also receive a one-time cash bonus from $200 to $1,000 for eligible employees, depending on the length of service. The cost of the added bonus pay is projected at $400 million. The bonuses are on top of the company’s MyShare bonus program for store employees and the annual performance bonus received by home office professionals.

“Our associates will see the wage increases and all bonuses pay reflected in their March 8 paycheck,” said Kory Lundberg, corporate spokesman at Wal-Mart.

Wal-Mart Stores CEO Doug McMillon announced the expanded employee benefits in a memo to employees early Thursday.

“Today, we are building on investments we’ve been making in associates, in their wages and skills development. It’s our people who make the difference and we appreciate how they work hard to make every day easier for busy families,” McMillon said.

“We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business, all of which should benefit our shareholders.” he added. “Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.”

The $11 base pay raise falls short of what has been requested from union groups. Cynthia Murray, a Walmart U.S. employee from Maryland and co-founder of OUR Walmart, asked in September for Wal-Mart to match Target’s per hour base pay of $15.

“Across the country people who work retail have been calling on their employers to raise base pay to $15 an hour for years. OUR Walmart would like to commend Target for finally listening to Target employees. Now, it’s time for Walmart to follow suit. As the company with the greatest overall revenue, Walmart can easily afford to match Target,” Murray noted.

Also as part of the extended benefits packages, Wal-Mart said it will expand its paid maternity leave policy to provide full-time hourly store employees with 10 weeks of paid maternity leave and six weeks of parental leave, which also applies for adoptions. Lundberg said the maternity leave has been different for full-time store workers and home office employees. The new policy harmonizes the coverage and store employees now get the same benefit as those working at home office.

McMillon said he was recently approached by two employees who pointed out the company could do more to help with adoption costs. He said the company will now contribute up to $5,000 toward the cost of adoption for its employees. This is a new benefit.

“Families are a priority to us and connecting with and caring for a new family member is obviously important,” McMillon noted.

McMillon also said the company continues to assess additional investments that will help it win with customers and benefit investors which will be made with employees in mind as well.

The expanded benefits will be effective next month as the company winds down its fiscal year on Jan. 31. Ben Beinvenue, an equity analyst with Little Rock-based Stephens Inc. applauded Wal-Mart’s decision to use tax benefits to invest in its people, prices and technology.

“We think the company’s commitment to improving in-store service levels will pressure other retailers to invest more heavily in wages and price. We believe this demonstrates Wal-Mart’s position of strength in the retail market place,” Beinvenue said Thursday. (Stephens conducts investment banking services on behalf of Wal-Mart and is compensations accordingly. Stephens is overweight on Wal-Mart shares.)

Beinvenue estimates the $300 million investment in wages equates to 8 cents per share in earnings. The cash bonuses will be a one-time charge of approximately $400 million, or 10 cents per share, against fourth quarter earnings. Stephens’ analysts estimate Wal-Mart could see a 50-cent per share benefit from the new tax reform law this coming year, excluding the investments already announced.

Talk Business & Politics asked Wal-Mart about any plans to repatriate profits under the new tax law given it runs a global operations. Wal-Mart spokesman Randy Hargrove said the company is evaluating the law and no decisions have been made about repatriation. Wal-Mart will likely have more details on its tax benefits during its fourth quarter earnings call on Feb. 20.