In a strategic shift, Walmart has announced a new approach to awarding raises for its hourly employees across U.S. stores, integrating both performance and tenure into the evaluation process. This development was revealed through a company memo, which has been shared with NewsNation, while Business Insider was the first to report on the change.

Under the new guidelines, annual pay increments will now be determined not just by the length of service, but also by three additional criteria: reliability, the performance of the store, and the daily conduct of employees. This marks a departure from the previous system, where raises were primarily based on seniority.

Highlighting the rationale behind the update, Cedric Clark, Executive Vice President of Store Operations, noted in a memo to managers last week that while loyalty was previously acknowledged, the old system did not adequately reflect the significant contributions and actions of individual associates. This new model aims to better capture the impact of each employee’s efforts within the organization.

“That recognized loyalty — but it didn’t fully reflect how individual associates’ contributions and actions make the difference,” EVP of store operations Cedric Clark wrote in the memo to managers last week.

Clark said the new “Pay for Performance” program responds to what associates have been asking for — more control over their earnings, more recognition for great work and clearer expectations.

Walmart is the largest private employer in the country, and the new raise program will affect more than half a million hourly store associates across the U.S.

Those who do well across the three performance metrics can earn up to a 5% increase based on their tenure and ratings. Associates will also have access to digital dashboards that provide more transparency about how they’re performing all year long.

“Coaching and feedback aren’t just nice-to-haves — they’re directly tied to growth, opportunity and associate engagement,” Clark wrote.

All U.S. store-based Walmart associates, both full-time and part-time, are eligible for a performance-based annual pay increase if they were hired on or before July 31, 2025. Base pay will not be reduced as a result of performance.

According to Walmart, the average hourly wage for U.S. frontline associates is close to $18.