#10: Costco is not frugal in salaries

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Costco is a very frugal company in almost all aspects of its business. In one area Costco is spending generously: in salaries and benefits. An average Costco employee gets paid more than the average retail worker. In addition Costco is said to be giving out more benefits to employees. You can read more about it here.

The better benefits and higher salaries have led to a low employee turnover rate. Many sources claim (unconfirmed by Costco) that Costco would have around 6 to 7% annual turnover of employees. A figure that is significantly lower than the industry average that is regarded of being closer to 20%.

A low employee turnover rate on the other hand is a more efficient way of operating a retail business. By taking better care of the employees, Costco in fact is more efficient and could save more money.

Despite getting better salary, the employees stay longer with Costco. This reduces the costs related to finding and orientating new employees. More experienced employees also tend to be more efficient, as they know how things should be done.

Costco does pay a lot to the employees, because it can.

Higher salaries for employees, not for executives

One area where Costco is not spending lavishly is the compensation to the executives. For decades Jim Sinegal took a salary of $350 000 despite running one of the worlds biggest retail operations. Even today, the CEO of Costco Craig Jelinek was paid last year $8,6 million. That is very little compared to the $20 million and $25,7 million to Target CEO Brian Cornell and Walmart CEO Doug McMillon.

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