Jello wrote:

Wal-Mart’s legendary obsession with cost containment shows up in countless ways, including aggressive control of employee benefits and wages. Managing labor costs isn’t a crazy idea, of course. But stingy pay and benefits don’t necessarily translate into lower costs in the long run.

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In return for its generous wages and benefits, Costco gets one of the most loyal and productive workforces in all of retailing’and, probably not coincidentally, the lowest shrinkage (employee theft) figures in the industry. While Sam’s Club and Costco generated $37 billion and $43 billion, respectively, in U.S. sales last year, Costco did it with 38% fewer employees—admittedly, in part by selling to higher-income shoppers and offering more high-end goods. As a result, Costco generated $21,805 in U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club. Costco’s stable, productive workforce more than offsets its higher costs.

These figures challenge the common assumption that labor rates equal labor costs. Costco’s approach shows that when it comes to wages and benefits, a cost-leadership strategy need not be a race to the bottom.

Pay your people well. It will save you money.

There's more to it than that. Particularly when talking about benefits design for employees, you get into things like absenteeism and worker productivity (called presenteeism). This is a rapidly advancing science and ties into a lot of the programs that are designed around direct medical costs in employee benefits (like wellness and disease management). It makes a lot of sense that someone who is battling with a chronic condition has a lot of sick days, higher risk for workers comp and disability, and is not particularly productive while at work because they are dealing with the effects of their condition. If you manage that condition effectively, you make that employee cost less and return more productivity. So it's not just wages, but what is the total compensation and benefit design that you are wrapping around that employee. This is a good case study on how all of that is something that you need to craft carefully for your employee population.