The truth about Walmart's new bonuses

Is It Time to go for Synchrony Financial (SYF), Wal-Mart Stores, Inc. (WMT)?

Wal-Mart Stores Inc. said it would raise starting pay to $11 per hour for all its US employees and hand out one-time bonuses as competition for low-wage workers intensifies and new tax legislation will add billions to the retailer's profits.

A one-time bonus benefiting all eligible full and part-time hourly associates in the U.S. The amount of the bonus will be based on length of service, with associates with at least 20 years qualifying for $1,000.

Investors didn't have a strong reaction to Wal-Mart's pay hike.

Since Wal-Mart's initial increase starting in 2015, many states have enacted minimum-wage laws, meaning that a "sizable group" of its 4,700 USA stores already pay $11 an hour, according to spokesman Kory Lundberg.

Other policy changes Walmart announced Thursday - particularly an expanded parental and maternity leave policy - could further help the retailer attract and retain better workers.

Currently, Wal-Mart's starting wage is $9 US until workers complete a training program.

The raise will increase the average hourly pay at Walmart for full-time employees from $13.85 to $14.50. In the previous economic uptick, wage growth peaked in December 2006 at 4.2 percent on a year-over-year basis. A discrete one-time charge will be taken in the fourth quarter of the current year to account for the bonus; qualification will be determined before the end of the month and payments will be paid as quickly as practical thereafter. Boeing Co., AT&T Inc. and Wells Fargo & Co. have all made similar announcements in recent weeks.

While the new law will create some financial benefit for the company, Walmart is early in the process of assessing potential additional investments.

"We are in the early stages of assessing the opportunities tax reform creates for us", President and Chief Executive Officer Doug McMillon said in a statement. The strategy paid off over the holidays: Target's store associates fulfilled 70% of its online sales, which helped to dramatically boost online sales compared to a year ago.

McMillon said Trump's corporate tax cut "gives us the opportunity to be more competitive globally and to accelerate plans for the U.S".

Walmart's wage increase will take effect in February.

Walmart is also increasing its paid leave policy for new fathers and non-birthing mothers to six weeks at full pay for full-time hourly workers.

With this move, the world's largest private employer has scored big points with Republican politicians, who now have a talking point for the campaign trail, and maybe also from shoppers who see its wage increase as socially responsible. The federal minimum wage is $7.25.

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