Compensation Administration in Hospitality: Types, Determination, and Current Issues | Study notes Human Resource Management

10/20/2014

1.Describe typesofcompensationandoutlinethemajor

influencesoncompensationplans

2.Describe majorcontentandprocesstheoriesofmotivationand

theirapplicationtocompensationplandesign

ManagingHospitalityHumanResources

Chapter8:CompensationAdministration

3.Outlinemethodsofdeterminingjobworthanddescribethe

advantagesanddisadvantagesofeach

4.Describe thestepsandidentifyoptionsforestablishingpay

structures

5.Describe currentissuesin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.

MajorInfluencesonCompensationPlans

•Costofliving

•Labormarketinfluences

•Unioninfluences

•Governmentinfluences

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region s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.

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rate s

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

Non

union



companies



typically



reward



individual



employees

•Whetherunionizedornot,hotelsinmarketsinwhich

unionsarepresentgenerallyhavehigher

compensationcosts.

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1.Describe types of compensation and outline the major influences on compensation plans 2.Describe major content and process theories of motivation and their application to compensation plan design

Managing Hospitality Human Resources

Chapter 8: Compensation Administration

3.Outline methods of determining job worth and describe the advantages and disadvantages of each 4.Describe the steps and identify options for establishing pay structures 5.Describe current issues in 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.

Major Influences on Compensation Plans

• Cost of living

• Labor market influences

• Union influences

• Government influences

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

compensationcompensation.

• 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.

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

Union Influences

• Unions influence compensation rates

union contracts generally have same pay for all employees who perform the same job
raises based on seniority

• NonNon‐ unionunion companies typically reward individualcompanies typically reward individual

employees

• Whether unionized or not, hotels in markets in which

unions are present generally have higher

compensation costs.

Government Influences

• Laws that mandate companies compensation for

their employees

minimum wage
wage rates
overtime pay
child‐labor restrictions

• Exempt

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.

External and Internal Equity

• External equity

pay variations among similar properties in a particular market

• Salary Survey

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

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

• PointPoint methodmethod

probably the most widely used method of job evaluation
A clearly point defined system assignscriteria a point total to each job on the basis of several
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

Competitive Pay Policies

• Pay leaders

– Leading the market

– Paying more than the market average

• Payy followers

– Lagging the market

– Paying below market average

• Meeting the competitors

– At market

– Pay the prevailing wage

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 payallows 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.

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
meritmerit paypay policies are intended to motivate policies are intended to motivate employeesemployees

• Pay scales can be determined by

Broadbanding
- eliminates all but a few comprehensive salary and job classifications
Careerbanding
- uses market surveys to determine scales

Compensation Administration in Hospitality: Types, Determination, and Current Issues, Study notes of Human Resource Management

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Partial preview of the text

Download Compensation Administration in Hospitality: Types, Determination, and Current Issues and more Study notes Human Resource Management in PDF only on Docsity!

Managing Hospitality Human Resources

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

– Indirect compensation

Major Influences on Compensation Plans

• Cost of living

• Labor market influences

• Union influences

• Government influences

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

compensationcompensation.

• Consumer price index

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

Union Influences

• Unions influence compensation rates

• NonNon‐ unionunion companies typically reward individualcompanies typically reward individual

employees

• Whether unionized or not, hotels in markets in which

unions are present generally have higher

compensation costs.

Government Influences

• Laws that mandate companies compensation for

their employees

• Exempt

• Non‐exempt

External and Internal Equity

• External equity

• Salary Survey

• Internal equity

• Job Evaluation

Job Evaluation Methods

• Ranking method

• Classification method

• PointPoint methodmethod

• Factor comparison method

Competitive Pay Policies

• Pay leaders

– Leading the market

– Paying more than the market average

• Payy followers

– Lagging the market

– Paying below market average

• Meeting the competitors

– At market

– Pay the prevailing wage

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

• 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.

Determining Pay Within Grades

• Seniority provides a good reason for establishing a range

of pay within job grades or classifications

• Merit