Sam’s Club will raise employee pay to incentivize employees to stay with the company rather than jump to Costco.Sam’s Club, a Walmart-owned membership club, will raise its minimum hourly wage from $15 to $16 starting in November. In addition, the company will give its nearly 100,000 employees raises ranging from 3 percent to 6 percent, depending on their length of service.
Sam’s Club charges customers $50 for a regular membership. In order to maintain and increase the number of members, Sam’s Club must meet a higher standard of customer service than open retailers. By offering higher wages and financial incentives to its employees, Sam’s Club hopes to create a stable and well-paid workforce that will enhance the quality of service. Its main competitor, Costco, offers the highest wages in the retail industry – with a minimum hourly wage of $19.50. In order to remain competitive with Costco and other chains that have raised wages, Sam’s Club needs to increase pay levels.
Sam’s Club increases wages to compete with Costco
Sam’s Club CEO Chris Nicholas told CNN, “Our goal is to create quality jobs and turn those jobs into great careers. Employee stability is more important to the membership club model than anywhere else.” This highlights a growing awareness in society about the need for secure, well-paying jobs that support both individuals and communities.
Retail wages have been on the rise in recent years as employers raise salaries to fill positions in stores and warehouses in a tight labor market. Since April 2020, the average hourly wage for retail employees has risen about 16 percent, from $21.18 an hour to $24.48 this past August. Daniel Schneider, a sociologist at Harvard University and co-director of The Shift Project, said, “Sam’s Club’s announcement reflects a trend of companies voluntarily raising their wage rates, which suggests that these companies recognize the need to keep employee turnover at manageable levels.”
Wage growth reflects broader retail industry trends
However, a wage of $16 per hour is still not enough to cover living expenses in many places. According to MIT’s Living Wage Calculator, the minimum wage in almost all areas of the United States does not cover the basic cost of living. The calculator estimates the income needed for workers across the U.S. to maintain basic living needs.
Previously, hourly employees at Sam’s Club were eligible to receive a 3 percent raise each year until they reached the wage ceiling, which was $36 per hour for certain positions. Under the new program, employees who stay with the company will receive raises of up to 6 percent per year until they reach the wage ceiling. Upon reaching the salary cap, employees will receive an additional lump sum payment equal to 6 percent of their annual salary. Schneider said, “Meaningful, guaranteed annual raises that grow with years of service will be a huge change for Sam’s Club employees.” He noted that Costco stands out among Sam’s Club and other retailers for its industry-leading wage levels and consistent wage increases for longtime employees.
Sam’s Club’s raises and new wage structure are its latest moves to attract employees. Over the past five years, Sam’s Club has increased starting pay from $11 per hour, offered annual stock awards, and implemented block scheduling to provide employees with more stable work arrangements. Since the 2020 epidemic, warehouse club business has grown rapidly, with Sam’s Club, Costco and BJ’s Wholesale Club all adding millions of new members. Many customers find bulk shopping at warehouse clubs so cost-effective that they are willing to pay an annual membership fee. Sam’s Club same-store sales increased 2.3% in the most recent fiscal year, compared to a 14.6% increase in the previous fiscal year.
Sam’s Club’s pay raise initiative not only reflects the general upward trend in wages in the retail industry, but also highlights the company’s focus on long-term employee retention. As the economic environment changes, companies are forced to make adjustments in pay, benefits and working conditions in order to retain experienced employees. Especially under the membership club model, service quality is closely related to member satisfaction, and a stable and experienced workforce is undoubtedly the key to enhancing the customer experience. Therefore, Sam’s Club hopes to strengthen its position in the highly competitive retail industry through continuous salary increases.
On top of that, Sam’s Club realizes that salary increases alone may not be enough to attract and retain employees. The company offers a variety of benefits to its employees, such as annual stock awards and a more stable scheduling system. These benefits not only enhance employee loyalty in the short term, but also improve employees’ career development in the long term, helping them better plan their careers. As competition in the retail industry intensifies, this employee-centered strategy may become the key to business success.
Long-term employee retention is key to success
Meanwhile, Sam’s Club’s pay raise program has had a demonstration effect on other retailers. Against the backdrop of competitors such as Costco continuing to raise their pay scales, other retailers may have to follow suit to avoid a brain drain, embracing the latest trends in wage structure improvements and employee retention efforts. With more and more companies restructuring their wages and benefits, the retail industry as a whole is expected to see a further increase in salary levels. However, whether wage growth can keep up with the rising cost of living remains an issue of concern.
