Is Walmart Cutting Costs With Temp Workers?
In a report sure to embolden those opposed to Walmart’s (NYSE:WMT) business practices, many of Walmart’s U.S. stores have only hired temporary workers in recent months, the first time it has done so outside of the holiday shopping season. Company spokesman David Tovar explained that the new hiring policy is not a cost-cutting move and is to ensure that “we are staffed appropriately.”
Temporary workers allow Walmart to adequately staff their stores on busy weeknights and weekends. Tovar contends that the majority of its staff remains regular full-time, however Walmart’s temporary staff — called “flexible associates” within the company — have risen from 1 to 2 percent before 2013 to a number approaching 10 percent. ”Their hours flex by the needs of the business from time to time,” Walmart U.S. Chief Executive Bill Simon told reporters the day before Wal-Mart’s annual meeting last week.
Walmart’s new hiring strategy could be seen as a way to cut costs amidst economic uncertainty. With consumers still struggling in the difficult economy, Walmart’s profit margins are as thin as ever. Additionally, with Obama’s healthcare reform potentially raising healthcare costs next year, the increase in temporary workers could be seen a cost-cutting strategy, although Tovar denies this.
Temporary workers at Walmart are often hired on 180 day contracts and might be hired for a regular or part-time position eventually or they can reapply for their temporary position when the contract is completed. A Walmart supervisor in North Carolina, who asked Reuters not to be named, explained that of the five new employees hired this year, all are temporary workers while existing employees have had their hours cut. A manager working in Alaska told Reuters, “Everybody who comes through the door I hire as a temporary associate.”
With Walmart’s hiring strategy sure to catch some heat, its main rivals — Costco (NASDAQ:COST) and Target (NYSE:TGT) – remain committed to hiring full-time and part-time workers outside of the usual holiday seasons. However, with U.S. unemployment at 7.6 percent as of last month, the conditions still give Walmart the edge in bringing on workers who might be displaced temporarily from their fields.
Walmart has also begun to change its healthcare plans ahead of Obama’s impending healthcare changes. Soon, part-time workers will need to work a minimum of 30 hours a week rather than 24 hours before qualifying for health insurance (with the healthcare reforms, large companies have to offer 95 percent of employees who work more than 30 hours a week or pay a $2,000 per worker penalty for the entire workforce). For workers with varying work schedules, like Walmart’s temporary workers, companies may elect to monitor eligibility over the course of a year meaning uncertainty over work hours and health coverage.
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