Human Resource Management in the Hospitality Industry - Case Study Example

Remuneration and Benefits – Human Resource Management Student’s Name Course Tutor’s Name Date: Remuneration and Benefits (HRM in the Hospitality Industry) Maggie’s Eatery is a medium-scale restaurant in New South Wales. Like most businesses in the hospitality industry, Maggie’s eatery has permanent employees to attend to its core business functions such as finance, operations, marketing, and human resource, but usually employs casual employees to attend to most of the waiting jobs. The main reason why Maggie’s eatery does not employ permanent employees for waiting jobs is because demand for restaurant services varies from one season to another. Additionally, most available employees seeking such jobs perceive work in the hospitality industry as transitional, which they often take up after completing their college studies and as they await to get jobs in their preferred careers. In other words, the human resource department at Maggie’s understand that most of the available talent is not trained in hospitality-related courses, and as such, their permanence in the job cannot be guaranteed. Strategically therefore, Maggie’s employ most of its workforce on a temporary basis and uses the Hospitality Industry Award 2010 as the basis for setting its wage rates. Legally, the HR department at Maggie’s is guided by provisions in the Fair Work Act (FWA) 2009 Australia, which gives provisions for employers to use any of the four fair work instruments – i.e. a workplace determination; an enterprise agreement; a modern award; or a Fair Work Australia (FWA) order to manage remuneration and benefits in the work place (Australian Government 2012). As indicated above, Maggie’s is currently using the Hospitality Industry (General) Award (the HIGA) 2010. Notably however, the terms of the modern award can change every 1st July, and it is therefore the HR department’s responsibility to ensure compliance. Modern awards are set according to provisions set out in Fair Work Act 2009 and as such, they contain a base rate, which all employers must meet. Appendices A and B indicate the remuneration and benefits requirements that Maggie’s must meet as part of the restaurant’s observance of the HIGA 2010 for the permanent, temporary and casual workers respectively. The HIGA contain allowances and penalty rates, which include: i. A minimum weekly wage of $686.20 for level 4 employees – this means that an employee at that level should earn a minimum hourly wage of $18.06. ii. Overtime hours performed between 1900-2400 hrs should earn the employee an additional $1.81 an hour, while overtime hours between midnight and 0700 hrs should earn an employee an additional $2.1 an hour. iii. Meal allowances are pegged at $11.14 per week iv. First Aid allowance is indicated as $8.23 per week, subject to an employee being a holder of a recognised first aid qualification, and based on their appointment by the employer to undertake first aid-related duty that may arise at the workplace. v. A fork lift driver working in the hospitality industry is entitled to a $10.29 weekly additional allowance. vi. Apart from casual employees, permanent and temporary employees who “have a broken work day” are entitled to $2.26 and $3.43 allowance per day for any additional two hours and three hours worked respectively (Australian Hotels Association (NSW) 2011, p. 2). vii. According to the HIGA, managerial employees in the hospitality industry are on the other hand entitled to a base annual salary of $38, 500.09 and a loaded annual salary of $48, 125.11. Information obtained from Australian Hotels Association (NSW) (2011). == The impact of the above legal aspects on the remuneration strategies and processes of Maggie’s Eatery According to Sims (2007), legal aspects regarding remuneration are complex since they include issues such as minimum wage, overtime provisions, equal pay for equal work, and other benefits which may vary from one organisation to another. Critically however, it would appear that the impact of the legal aspects is simply the setting of standards that employers cannot contravene. In Maggie’s Eatery for example, HRM cannot set remuneration below the rates identified by the HIGA. Arguably, the HIGA framers must have been convinced that such pay rates were fair since compensation systems are ideally based on the fairness concept. For Maggie’s Eatery however, the HR department must mesh the legal requirements with the organisation’s objectives. Additionally, the legal requirements must be integrated with the organisation’s profitability levels and/or its ability to pay as indicated by Sims (2007). In other words, Maggie’s Eatery would have to set a limit of how many employees it can have at any one time based on the legal requirements and its ability to pay for the same. In economic theory, it would be argued that the legislative requirements (e.g. minimum wages) put a limit to the activities that the employer can engage in (e.g. employment). Consequently, and using the example of minimum wage requirements, it would be expected that setting the minimum wage above what would be considered as the competitive wage by employers, would lead to a reduction in employment. Overall, and indicated by Bhaskar, Manning and To (2002, p. 169) most businesses must balance between the legal requirements and their inherent objective of profit-making. As such, hiring should be made in the quantities that can effectively serve the business needs of the company, thus making profits for the same, while receiving the legal market-rate wages as stipulated in the legal requirements. Similarly, Maggie’s eatery should strike a balance between its profitability, and the number of employees earning the minimum wages (or more), who can sustain or enhance the organisation’s profit-making potential. As noted by Bhaskar et al. (2002), an employer can also raise the effort standard requirements for each employee, thus limiting the business’s exposure to loss. Risks to the organisation of non-compliance According to Hartlapp (2007, p. 658), not all organisations comply with legislative requirements imposed on their business, mostly because they are not always convinced that compliance would improve efficiency, and /or because they don’t subscribe to the concept that compliance would have positive impact on stakeholders who would be affected as a result. Non-compliance however is not without risks. Tallberg (2002, p. 621) for example indicates that if detected, non-compliance can lead to legal sanctions, whose costs can outweigh the cost of compliance. In other words, the business would end up losing more money than would have been the case if it had complied with the legal requirements. In Australia, non-compliance to the provisions of the Fair Work Act 2009, employers can be ordered to pay civil remedies to the employees if found in contravention of the legal requirements therein. In extreme cases (especially if a business refuses to comply with the court’s decision to award civil remedies to employees), a business license can be suspended or even revoked. Supposing Maggie’s Eatery would succeed in non-complying with the HIGA without being detected by the legal institutions, the business would still stand the risk of losing employees to complying competing organisations, especially if the latter have better remuneration and benefits arrangements. To manage the above risks, Maggie’s Eatery would first need to identify them, and then determine whether the benefits of non-compliance outweigh the benefits of compliance. The organisation would for example need to determine the likelihood of civil penalties issued for non-compliance eroding any benefits acquired from the same or even from other business practices. The Australian Tax office requires employers to pay fringe benefit taxes for specific benefits offered to employees. Such include the expense of paying for an employee’s travel or performance of a specific duty; discounted or free property; paid parking for an employee; accommodation and meals (especially during travel); “a living away from home allowance”; interest-free loans, or reimbursing employees for expenses they had incurred among other things (Australian Government 2011). Monitoring and compliance improvement Article 49(1) (a) and (b) indicates that a modern award (such as the HIGA) becomes operational “on 1 July in the next financial year after it is made; or if it is made on 1 July in a financial year- on that day” (Australian Government 2013, the Act article 49 (1)). To effectively monitor compliance, Maggie’s Eatery would need to be attentive to any changes made on the relevant modern award that is applicable to the hospitality industry. Additionally, the organisation can establish a worker’s complaint procedure – which in addition to dealing with work-related issues – can be used as an instrument for enhancing communication between lower-cadre employees and the management. Such efforts can be enhanced further by self-monitoring, reporting, and record-keeping by the management, where workers can be remunerated or given benefits based not only on legal requirements, but also on their relative input in the job. For example, if customer service succeeds in attracting more repeat customer dues to exemplary service provision, they can earn bonuses based on the same. If on the other hand the high quality food succeeds in bringing in repeat customers, regardless of the kind of service offered in the restaurant, the HR department at Maggie’s would in an ideal scenario award bonuses to the food and beverage department for their input. References Australian Government 2011, ‘Fringe benefits tax- a guide for employers: Chapter 1- what is fringe benefits tax?’ Australian Taxation Office Legal Database, viewed 18 March 2013 < http://law.ato.gov.au/atolaw/view.htm?DocID=SAV%2FFBTGEMP3%2F00002>. Australian Government 2012, ‘Fair work Act 2009-C2012C00483’, ComLaw, viewed 18 March 2013, < http://www.comlaw.gov.au/Details/C2012C00483>. Australian Hotels Association (NSW) 2011, ‘Hospitality industry (general) award 2010 2011 wage rates and allowances’, viewed 18 March 2013, . Bhaskar, V, Manning, A & To, T 2002, ‘Oligopsony and monopsonistic competition in labour markets’, Journal of Economic Perspectives, vol. 16, no. 2, pp. 155-174. Hartlapp, M 2007, ‘On enforcement, management and persuasion: different logics of implementation policy in the EU and the ILO’, Journal of Common Market Studies, vol. 45, no.3, pp. 653-674. Sims, R R 2007, Human resource management: contemporary issues, challenges and opportunities, IAP, New York. Tallberg, J 2002, ‘Paths to compliance: enforcement, management and the European Union’, International Organisation, vol. 56, no. 03, pp. 609-643. Appendix A: Pay requirements for permanent and temporary workers in the hospitality industry Source: Australian Hotels Association (NSW) (2011). Appendix B: Pay requirements for permanent and temporary workers in the hospitality industry Source: Australian Hotels Association (NSW) (2011). Read More