The Real Reason Costco Has Such A Low Turnover Rate

On the employee page of their website, Costco almost immediately states their priorities of maximizing employee productivity while minimizing turnover. While this may sound like a no-brainer the extent to which they have succeeded in doing this is still remarkable. Accord to Business Strategy Hub's 2020 analysis, Cotsco's employee turnover rate was below 6 percent, which tracks with a rave Glassdoor review that claims the company has a 94 percent employee retention rate. The fact that almost every employee stayed means that Costco must be doing something right.

At a glance, the salary and benefits offer plenty of incentive to stay on. In 2019, Fox Business included Costco on a list of large companies raising their minimum wage, in Costco's case to $14 per hour. Additionally, their average hourly wage was $22.50 per hour, though they do not say who gets included in the maths behind the averaging. However, Costco employees also receive a benefits package that covers a good amount of basic prescribed and needed medical treatments, including a form of dental and vision, a 401K plan, and an employee stock purchase program

Quoting Bloomberg interview, HuffPost shares the reasoning behind Costco's CEO and president Craig Jelinek's decision to be so comparatively generous. It sounds pretty straightforward: "I just think people need to make a living wage with health benefits. It also puts more money back into the economy and creates a healthier country. It's really that simple." And, as Costco's employee turnover rate apparently shows, it works.

People who work at Costco but not for it

For the above reasons, as well as others like their decision also reported by HuffPost to close on Thanksgiving so workers will have "[a] nice holiday with their families", Costco was named the best company to work for in 2017 (via The Penny Hoarder). However, Groundswell pointed out in 2014 that while we should laud Costco for how it treats its employees, who it has treated as its employees is another question. 

Specifically, the people who handle the free samples used to belong to a company called Club Demonstration Services, which billed itself as "the preferred in-house event marketing provider to Costco" in the first sentence of its About CDS page. The free sample givers belonged to another company, but the symbiotic relationship between the two services makes the distinction very thin. Yet, according to Indeed's salary information about the company, shift leaders on average made $14.10 per hour, barely above Costco's minimum wage.

The above description of Club Demonstration Services is written in the past tense because COVID-19, as COVID-19 is wont to do, has caused Costco to cut ties and the company to close as a result. As the news broke in April, Buzzfeed explained that Costco had started shifting CDS employees into sanitation work before their contract expired and that the company's chief operating officer promised the return of free samples soon as they were "part of our DNA." Hopefully, this change may induce Costco to include free sample providers as benefit-receiving employees.