Human resource exam
Describe types of compensation and outline the major influences on compensation plans
Describe major content and process theories of motivation and their application to compensation plan design
Outline methods of determining job worth and describe the advantages and disadvantages of each
Describe the steps and identify options for establishing pay structures
Describe current issues in compensation administration
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Compensation Policy
Articulates where the company wants its pay policies to be in the marketplace and how the company will reward and motivate employees
Monetary compensation is commonly divided into the following:
Direct compensation
payment of money to an employee in exchange for work
Indirect compensation
compensation given as a condition of employment rather than in direct exchange for work.
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Major Influences on Compensation Plans
Cost of living
Labor market influences
Union influences
Government influences
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Cost of Living
Refers to the real dollar value of a worker’s purchasing power for ordinary necessities such as food and clothing
The cost of living in different regions is also a factor in compensation.
Consumer price index
computed by comparing the retail prices of goods and services at a fixed time with the prices at subsequent or prior times
is generally the best overall indicator of the real value of wages or salaries.
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Labor Market Influences
The number of available workers varies
Unemployment
Type of work
Location/regional economic conditions
Compensation rates vary according to worker availability
Internal conditions of a company influence compensation rates
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Union Influences
Unions influence compensation rates
union contracts generally have same pay for all employees who perform the same job
raises based on seniority
Non-union companies typically reward individual employees
Whether unionized or not, hotels in markets in which unions are present generally have higher compensation costs.
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Government Influences
Laws that mandate companies compensation for their employees
minimum wage
wage rates
overtime pay
child-labor restrictions
An employee who is not subject to the minimum wage or overtime provisions of the Fair Labor Standards.
Non-exempt
An employee who is subject to the minimum wage or overtime provisions of the Fair Labor Standards.
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
External and Internal Equity
External equity
pay variations among similar properties in a particular market
External analysis depends on direct collection of information from competing organizations in the market
Internal equity
pay variations within a particular company
Job Evaluation
Internal analysis based on establishing meaningful compensable factors
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Job Evaluation Methods
Ranking method
usually uses a team of managers to rank jobs
Classification method
compares each job to a predetermined grade or class
Sometimes called job grading
Point method
probably the most widely used method of job evaluation
A point system assigns a point total to each job on the basis of several clearly defined criteria
jobs are then placed in job grades according to their point totals.
Factor comparison method
entails identifying key jobs
generally those that that are extremely important to the success of the organization
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Competitive Pay Policies
Pay leaders
Leading the market
Paying more than the market average
Pay followers
Lagging the market
Paying below market average
Meeting the competitors
At market
Pay the prevailing wage
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Pay Grades
Each hospitality organization must determine the number of pay grades it will use
It is important to establish ranges of pay within each grade
allows employees to receive raises without changing pay grades
Performance pay must be high enough to effectively reward performance
Must be observed differences in pay between people who make higher and lower contributions to the organization.
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Determining Pay Within Grades
Seniority provides a good reason for establishing a range of pay within job grades or classifications
Merit
typically the second determinant of pay within grades
merit pay policies are intended to motivate employees
Pay scales can be determined by
Broadbanding
eliminates all but a few comprehensive salary and job classifications
Careerbanding
uses market surveys to determine scales
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Other Pay Structure Options
Two-tier wage systems
provide a higher pay structure for existing employees and a lower one for employees hired beyond a specific date
Skill-based pay systems
assume that a company can afford to pay more to people who do more
Knowledge-based pay
a variation of a skill-based pay system in which pay is tied to knowledge rather than to skills
“On-call pay”
companies provide pay premiums to on-call employees
Team-based pay rewards
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Current Issues in Compensation
Pay secrecy
Wage compression and expansion
Comparable worth
Wage and hour audits
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Pay Secrecy
The decision of whether or not to keep pay rates secret involves at least two issues:
Does the company make its pay grades and the pay ranges of those grades known to employees?
If the company prefers pay secrecy, does it attempt to prevent or forbid employees from discussing their pay with other employees?
The National Labor Relations Board has repeatedly found policies that forbid or discourage employees from discussing their pay to be unfair labor practices
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Wage Compression and Expansion
Wage compression
levels of demand result in higher pay for new employees than for current employees
primarily caused by competition with other companies for new hires
Wage expansion
occurs when employers try to raise pay rates of current employees to keep salaries in line with higher wages of new hires
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Comparable Worth
Many people confuse comparable worth with equal pay issues
Equal Pay Act prohibits pay discrimination in the same job
Comparable worth deals with the issue of pay in similar jobs
Comparable worth advocates cite the fact that pay is based on job classification rather than on the work that goes into a job
Managing Hospitality Human Resources
Chapter 8: Compensation Administration
Wage and Hour Audits
All pay policies and procedures must comply with the provisions of the Fair Labor Standards Act
Policies and procedures that are inconsistent with the act can result in fines for a company and back pay for employees
Managing Hospitality Human Resources
Chapter 8: Compensation Administration