Chapter 10 Employee Retention Strategies

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Chapter 10Employee Retention Strategies
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Objectives

• Understand the strategic nature of retention
  practices.
• Comprehend the basics of compensation practices.
• Recognize the different types of benefits offered
  in most organizations.
• Understand the basic provisions of the FLSA.

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Employee retention and turnover

• Employee Retention
• An outcome associated with solid management
  practices and proactive decision-making
  activities
• Employee Turnover
• the total number of voluntary and involuntary
  separations from the organization divided by the
  total numbers of employees

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Employee turnover rates

• Annual turnover rate of terminations
  100
• Average
  of employees
• 75/25 100
• 300
• Adjusted turnover rate of terminations -
  of desired termination 100 Average of
  employees
• (75 - 10)/25 100
• 260

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Compensation administration in the hospitality
industry

• Competitive pay rates would attract qualified,
  competent people
• A reward for longevity with your company that
  would encourage retention among the employees
• A promotional incentive would motivate your
  people to seek the opportunities your hospitality
  organization has to offer
• A reward for quality work to show all employees
  that your organization strives for excellence in
  the goods and services it provides
• An equitable system that all employees view as
  fair
• Procedures that permit a uniform approach to
  compensation changes that seek to maintain the
  integrity of the reward system
• An effective method for controlling compensation
  costs. This is based on your organizations
  ability to pay

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I. Compensation Administration

• Consideration (money paid) for services rendered
  through the employment relationship
• A. Direct Compensation
• Includes pay and financial incentives
  as consideration for work that is
  performed through the employment relationship
• B. Indirect compensation
• Not paid directly through dollars, but provide
  to the worker in return for being
  employed by the company

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A. Direct (pay) Compensation

• Wages
• based on time worked (e.g., hourly wage)
• Salary
• consistent rate
• Piece Rate
• payment based on units of production
• stratified unit production payment is referred to
  as modified piece rate
• Incentive Pay
• commissions and bonuses based on levels of
  performance

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Exempt vs. Nonexempt Personnel

• Exempt
• Not required to be paid overtime based on federal
  minimum wage law 13(a)(1)
• Executive (GM)
• Professional (CPA)
• Administrative (Chief Info officer)
• Nonexempt
• Must be paid overtime
• Employees on hourly wage
• Employees of amusement or recreational
  establishments having seasonal peaks
• Seamen on non-American vessels

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Legal Factors - Fair Labor Standards Act (FLSA)
1938

• http//www.dol.gov/esa/regs/compliance/posters/fls
  a.htm
• The major federal statute (law) that affects
  compensation practices
• Applies to private and public sector
  organizations
• with 2 or more employees
• And gross revenue of 500,000 or more
• This law provides for the issues (federal) in the
  workplace
• Federal minimum wage
• Overtime payment provisions
• Protection of child labor

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Compensation Administration- External Factors

• Wage Compression
• Supply and demand of KSAAs
• Cost of Living Allowances (COLA)
  
  in the industry and geographic locations.

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Pay System Policy

• How does the mid-range worker know what the new
  worker is making?
• Open pay system
• pay grades are openly communicated to the
  employees
• Closed pay system
• wages and salaries are classified information
  available only to those with a need to know

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Policy for Awarding Pay Increases

• Seniority
• The length of employment with an organization
• We see this a lot in organizations with employee
  union representation
• Merit
• Based on performance measures
• Requires a great deal of administrative work to
  ensure equity and avoid claims of discrimination
  
• COLA
• Used to keep pace with the buying power in the
  economy

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I. Compensation Administration

• A. Direct Compensation
• B. Indirect compensation
• not paid directly through dollars, but provide
  something of value to the worker in return for
  being employed by the company
• Perks/Benefits

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B. Indirect Compensation

• Perks Employee benefits and perquisites
• Perks
• luxury items intended to reward employees for
  organizational membership
• Company cars
• Country club memberships
• Access to recreational facilities.
• Benefits (insurance, time off)
• reward employees for membership in the
  organization

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Employee Benefits

• Forms of indirect compensation made usually to
  full time workers as rewards for membership in
  the organization
• Voluntary
• Additional benefits provided to employees
• Mandatory
• Determined by law

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Employee Benefits (10.3)

• MANDATORY BENEFITS
• Workers Compensation
• Unemployment Compensation
• Social Security
• COBRA Benefits
• FMLA

• VOLUNTARY BENEFITS
• Health Insurance
• Life Insurance
• Disability Insurance
• IRA, 401k
• Leaves of Absence
• Paid Holidays
• Paid Vacations
• Paid Sick and Personal Time
• Education Assistance
• Child Care Assistance
• ESOP, Stock Options, and Profit Sharing
• Social and Recreational Benefits

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Mandatory Benefits

• Serve an appropriate purpose in safeguarding the
  individuals in the workplace
• Workers Compensation
• Unemployment Compensation
• Social Security
• COBRA Benefits
• FMLA

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Mandatory Benefits1. Workers Compensation

• Provides medical care, disability payments and
  death benefits resulting from work- related
  injuries or illness
• Workers compensation insurance company
• The premium is based on
• Typically look at 4 years of claims
• Proactive approaches for workplace safety
• In the 100s of thousands of dollars range for
  medium size hospitality organizations
• Most areas of the hospitality industry are
  considered to be high-risk workplaces according
  the workers compensation actuaries

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Mandatory Benefits2. Unemployment Compensation

• Provides compensation payments to individuals who
  are unemployed due to layoffs or downsizing
• A state enforced mandatory benefit
• the rate paid to most states is based on claims
  experience
• HR managers enforce strict policies concerning
  involuntary separations from the organization and
  zealously defend the company in compensation
  claims disputes.

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Mandatory Benefits3. Social Security

• A result of the Social Security Act
• Administered by the Social Security
  Administration (federal agency)
• The employer matches payments
  into social security
  retirement accounts for each employee on the
  payroll
• The intent of the benefit is to supplement other
  retirement income for retirees
• Never intended to provide total retirement to
  individuals in their later years

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Mandatory Benefits4. COBRA Benefits

• The Consolidated Omnibus Budget Reconciliation
  Act (a federal law)
• Provides for extension of health insurance
  coverage to employees who are eligible for
  qualifying events (circumstances surrounding an
  employees situation after leaving an employer)
• Former employees who are eligible for extended
  insurance coverage for a period of 90 days, must
  pay the full premium plus a 2 percent
  administrative cost to the former employer.

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Mandatory Benefits5. FMLA

• The Family Medical Leave Act
• Provides for mandatory leaves of absence to
  employees with a qualifying family or health
  care leave
• The usual extent of a leave is 60 days
• The employee must be returned to the same type of
  position with equivalent pay levels

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Voluntary Employee Benefits

• The importance of benefits seems to vary with age
  groups
• Younger workers seem to place less emphasis on
  retirement benefits than older workers
• Workers with families place higher emphasis on
  family benefits, as opposed to individual benefits

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Voluntary Employee Benefits

• Health Insurance
• Life Insurance
• Disability Insurance
• IRA, 401k
• Leaves of Absence
• Paid Holidays
• Paid Vacations
• Paid Sick and Personal Time
• Education Assistance
• Child Care Assistance
• ESOP, Stock Options, and Profit Sharing
• Social and Recreational Benefits

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Voluntary Employee Benefits-- Health Insurance

• The costs of medical care continues to spiral
  upward.
• Health care coverage is very important to most
  people
• Most health care plans are contributory
• The employer pays only a portion of the insurance
  premium and the employee pays the balance through
  payroll deductions.
• The employer to employee payment ratio is usually
  60/40 in terms of percentages of premium
  payments.
• Health Maintenance Organization (HMO)
• Provide preventative care to individuals before
  they became ill.
• Plan administrators seek the most inexpensive
  means to provide medical care.
• Provides for flat rate co-pays on the part of a
  patient
• Preferred provider option (PPO)
• A hybrid of indemnity insurance.
• Involve deductibles that are paid by the patient
  up to certain limits.

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Voluntary Employee Benefits

• Life insurance
• Pay a benefit to named beneficiaries in the event
  of the death of a worker.
• Provide final expenses and provide a small
  portion of income for remaining family members.
• Disability insurance
• Provides income to individuals who are unable to
  work due to illness or accidents. (different
  from workers compensation)
• Short-term disability provides incomes for
  shorter ranges of time
• Long-term disability after which a long-term
  policy would start to contribute if an individual
  has such coverage.
• The employee usually pays nothing for the life
  insurance premium and 100 percent of the
  discounted rate for any disability coverage.
• Any contributions from the employee are deducted
  from the paychecks.

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Voluntary Employee Benefits3. Retirement benefits

• Designed to provide streams of income during the
  years after a person retires from working full
  time
• Social security is merely a supplemental
  retirement fund, with the majority of retirement
  benefits derived from benefits from individual
  retirement accounts (IRAs)

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Voluntary Employee Benefits4. Time-off
Benefits

• The employee is paid for a time that is not
  actually worked
• Paid holidays, vacations, and sick or personal
  pay
• Most hospitality organizations provide fulltime
  employees with 6 holidays and 4-6 sick days per
  year.
• Most vacation policies usually call for one-week
  after one year and two-weeks after two years.
• Some organizations provide for 3-or-4 weeks of
  vacation for long tenure, such as five or ten
  years of service to the organization.

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Voluntary Employee Benefits5. Assistance
Benefits

• Help employees with uninsured benefits such as
  education.
• Education assistance (or reimbursement program)
• Employers pay portions of tuition and other
  training dollars to encourage employees to pursue
  self-development interests.
• Most organizations require job relatedness as a
  condition of education assistance
• Only pay for those development activities that
  will enhance the employees performance in the
  organization.
• Day care assistance
• Earn the loyalty of parents with young children.
• Due to the very high costs associated with
  childcare, only a few hospitality organizations
  provide this benefit.

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Voluntary Employee Benefits6. Financial
Incentive Benefits

• Provide buy-in to the performance of the
  organization.
• Employee stock ownership plans (ESOP) and stock
  options
• The option to purchase company stock at a
  discounted rate) -directly related to the public
  valuation of the corporation.
• Profit sharing
• permits employees to benefit from the short-term
  profitability of the organization.
• A number of hospitality organizations have social
  and recreational facilities and offer the use of
  these areas to the staff as employee benefits.

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Employee Incentives

• Additional compensation that is tied directly to
  performance standards.
• Three levels. (depends on the org. culture,
  climate, and objective)
• Individual incentives
• Particular workers strive to earn their own
  incentive rewards.
• Group incentives
• shared among members of a work unit, such as an
  operating department.
• Organization-wide basis incentives
• all workers will share in the accomplishment of a
  goal that exceeds normal operating standards.

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Employee Recognition

• Employee of the month
• (the quarter/the year)
• Provide motivating recognition programs over the
  years
• Credible programs that facilitate opportunities
  for employees at all levels of the organization
  to celebrate each other.
• credibility based on employee trust
• But

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Safety Programs

• Risk managers
• Ensure that the workplace provides for accident
  and illness prevention
• The Occupational Safety and Health Act
• http//www.osha.gov/
• Provides for safety regulations for worksites
• Safety Committees that oversee Accident and
  Illness Prevention programs
• Two approaches to worker safety
• Psychological
• the behaviors of the employees
• Engineering
• Hazardous environments

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Wellness Programs

• Programs to assist the workers with
• Physical fitness programs
• Health and nutrition programs
• Financial counseling
• Other activities aimed at the welfare of the
  employees
• Employee Assistance Programs
• Outsource referrals to a variety of health care
  and legal professionals such as mental health
  counselors, substance abuse and other addiction
  programs, financial debt counseling, legal
  assistance, marriage counseling and other
  services.
• Individuals within the HR office (a male and
  female) are appointed to handle EAP issues on a
  highly confidential basis taking every precaution
  to safeguard the anonymity of individuals seeking
  assistance through the EAP.
• Wellness programs may include proactive programs
  such as fitness classes, as well as reactive
  programs like those provided through an EAP