October 26, 2005

Wal-Mart memo proposes cost cuts: report

NEW YORK (Reuters) - An internal memo sent to the Wal-Mart
Stores Inc. board proposes numerous ways to hold down health
care and benefits costs with less harm to the retailer's
reputation, including hiring more part-time workers and
discouraging unhealthy people from seeking jobs, the New York
Times said on Wednesday.

The paper said the draft memo to Wal-Mart's board was
obtained from Wal-Mart Watch, a pressure group allied with
labor unions that says Wal-Mart's pay and benefits are too low.

The paper said in the memorandum Susan Chambers, Wal-Mart's
executive vice president for benefits, also recommends reducing
401(k) pension contributions and wooing younger, and presumably
healthier, workers by offering education benefits.

The memo is quoted as expressing concern that workers with
seven years' seniority earn more than workers with one year's
seniority, but are no more productive, said the paper, which
posted the memo on its Web site
). To discourage unhealthy job applicants, the paper said,
Chambers suggests Wal-Mart arrange for "all jobs to include
some physical activity (e.g., all cashiers do some

The memo also proposed that employees pay more for their
spouses' health insurance, called for cutting the company's
401(k) contributions to 3 percent of wages from 4 percent and
for cutting company-paid life insurance policies.

The memo acknowledged that Wal-Mart, the world's largest
retailer, had to walk a fine line in restraining benefits
because critics attacked it for being stingy on wages and
health coverage. Chambers in the memo acknowledged 46 percent
of the children of Wal-Mart's 1.33 million United States
employees were uninsured or on Medicaid.

Wal-Mart executives said the memo was part of an effort to
rein in benefit costs, which have soared by 15 percent a year
on average since 2002. Like much of corporate America, Wal-Mart
has been squeezed by soaring health costs, the paper said.

The proposed plan, if approved, would save the company more
than $1 billion a year by 2011, the paper said.

In an interview, Ms. Chambers said she was focusing not on
cutting costs, but on serving employees better by giving them
more choices on their benefits. Chambers also said that she
made her recommendations after surveying employees about how
they felt about the benefits plan.

One proposal would reduce the amount of time, from two
years to one, that part-time employees would have to wait
before qualifying for health insurance. Another would put
health clinics in stores, in part to reduce expensive employee
visits to emergency rooms.

Wal-Mart's benefit costs jumped to $4.2 billion last year,
from $2.8 billion three years earlier. Last year Wal-Mart
earned $10.5 billion on sales of $285 billion.

Under fire because less than 45 percent of its workers
receive company health insurance, Wal-Mart announced a new plan
on Monday that seeks to increase participation by allowing some
employees to pay just $11 a month in premiums.