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Best Practices for Performance Review

One of the greatest challenges for companies in regards to their employees is the performance review process. Employees are evaluated on their performance of assigned job responsibilities, receiving feedback on areas they are doing well in as well as any areas that may need improvement. Reviews are used as a key component for career development, encouraging employees to work harder, reach higher and set attainable goals for the future.

Performance reviews can be a very helpful tool for both the business and the employee when done properly. A major problem with performance reviews is that often times they don’t accomplish what they set out to, leading to stress for both the employee and the employer. It may be difficult to know how to go about overhauling or tweaking your performance review process.

When giving a performance review, you must consider what your organization seeks to accomplish by completing the process. The following are a few of the best practices in regards to achieving beneficial performance reviews:

  • Employee performance reviews must be tied to business objectives. If your employees are consistently receiving high performance scores, but the business is not meeting its goals, then you may need to tweak your process.
  • Plan review performance dates strategically. As listed above, performance reviews should be tied to business objectives; therefore, you should align the performance review schedule with the company’s annual cycle instead of an irrelevant date, such as the anniversary of employment. Employees can be better evaluated after reviewing how the business as a whole performed during the fiscal calendar year.
  • Remember that the review process is always about the employee. As an employer, you must be direct in providing feedback. Be completely open and honest. Employees need to understand what they are doing well and what they can improve upon in order to set personal goals. There should be no question as to what is expected of them before their next performance review.
  • Performance review forms should only be used for a maximum of five years. Businesses are constantly changing and evolving, so it only makes sense for the performance review form to evolve too in order to achieve maximum efficiency.

If you would like to develop a more effective performance review process, consider the expert services of WageWatch. Using performance review data, we can help you to establish a budget for your company through the use of salaries surveys, compensation surveys and other data. With over a decade of experience working with industry associations and employer groups, we have the expertise to provide your business with online benefit, wage and compensation surveys. To learn more about how WageWatch can help you, please call 480-237-6130 or contact us online.

Posted in Benefits & Compensation on December 27th, 2012 · Comments Off on Best Practices for Performance Review

Best Practices: Balancing Internal and External Pay Equity

Whether in the context of real estate, common stock, equipment or wages, equity is a term that relates value between different choices, opportunities or investments. Studies into organizational behavior theorize that employees are continuously monitoring and evaluating their work and pay against those of their peers. Perceived unfairness can result in severe production problems.

In order for a business to operate effectively, the company needs to develop a compensation strategy that achieves the two goals of paying wages considered fair to employees, while providing a financial return on the investment for the employer.  Wage equity has two approaches. The first is externally driven by market forces. The second is an internal focus, driven by the employer’s valuation of the job.

Using market pricing to establish wages and salaries is called market based pay. WageWatch has found that market based pay is the best practice approach to designing compensation policy in competitive market segments such as the hospitality, healthcare, and not-for-profit. Every WageWatch salary survey is a market based strategy. Market based pay systems benefit from being inherently empirical, built from research, through surveys, reporting what similar jobs are paid in the organizations that one competes with in the labor market.

Committing to a market base pay compensation structure means that employees will be paid at a competitive wage when compared with rates offered to people in similar positions in peer organizations. The labor market, ruled by supply and demand, drives this approach. The WageWatch PeerMark ™ Survey and online report building tool is designed for custom selection of competitors from which to accurately benchmark job titles. Wage and percentile variances illustrate where you are positioned in the marketplace.

External equity is one side of the coin. There is also the employer’s perception of fairness called internal equity. Where external equity is a measure of market competitiveness forming its basis on job functions and duties, internal equity is a measure of internal worth with a basis in job autonomy and responsibility. If you have multiple incumbents in the same job title who are paid differently, the differences in pay are an expression of internal equity.

We analyze internal equity in a way similar to external market analysis in that we determine worth relative to benchmarked job titles, but different in that the benchmarks are internally established. Internal benchmarks are particularly useful in evaluating both unique and hybrid job titles for which external benchmarks do no exist. Variance analysis here looks inward at wage compression, organization structure, reporting relationships, and job families.

Managing external and internal equity is a dynamic process requiring human resources to stay vigilant on changes in market conditions and business demands. The market based pay approach to compensation gives the influence of the external market on wages precedence over internal equity. The WageWatch PeerMark ™ Salary Survey reports the most current data available which forms the basis of the external analysis. However, since both approaches have the aligned goals of attracting and retaining a talented workforce, the WageWatch Compensation Consulting Team is available to conduct internal equity audits to address employer concerns and add creditability to pay practices.

Posted in Benefits & Compensation on December 20th, 2012 · Comments Off on Best Practices: Balancing Internal and External Pay Equity

The Impact of the Affordable Care Act on Business

The Affordable Care Act is already causing much confusion for American companies as well as for the general public. The law, as passed, was over 2,500 pages long and will require thousands of additional pages of regulatory policy in order to be enacted.  As we enter the year 2013, there will be many more changes to healthcare as the new law and the regulatory policies surrounding it take effect. As the provider of employee benefits, business owners need to fully understand the impact that the Affordable Care Act will have on their business and their employees over the next few years.

The professionals at WageWatch would like to share the following refresher on some of the most important policies within the Affordable Care Act:

1. Small business owners will receive a tax credit on their contribution to employee insurance policies. For businesses with less than 10 employees, each with average wages under $25,000, they will receive a 50 percent tax credit on their contribution. These tax credits apply to all small businesses up to 50 employees with average wages of $50,000, although the credit is reduced on a sliding scale depending on the businesses size and average salary.

2. Beginning in the year 2018, the Affordable Care Act will impose a 35 percent tax on employer provided health insurance plans that exceed $10,200 for individual coverage and $27,500 for coverage of a family. The idea behind this policy is that business owners will aim to avoid expensive insurance policies known as Cadillac Plans, and insurance companies will be forced to modify coverage with an eye to keeping costs down.

3. If you are a small business with 51 or more full time employees, you will be fined $2,000 per employee, excluding the first 30 employees, if you do not offer insurance for employees that work an average of 30 or more hours each week.  For small businesses with 50 or fewer employees, there is no penalty. Small businesses of all sizes are also not required to provide insurance for part-time employees.

4. Business owners must offer insurance that is certified affordable to employees. The premium for each employee’s plan cannot exceed 9.5 percent of their total household income. If the insurance coverage doesn’t meet the affordability law, employees should be offered tax credits to purchase insurance on their own. Business owners will then have to pay whichever is less: $3,000 per employee that receives the credit or $2,000 per employee, excluding the first 30 workers.

5. Businesses with less than 100 employees that work an average of 25 or more hours per week are eligible for grants to start wellness programs. These programs encourage employees to take control of their health by living more healthy lifestyles, which helps to prevent harmful health conditions down the road.

It is clear from just the five points above, that much is still to be determined before implementation can take effect. Please stay tuned as we will continue to provide you with updates on ACA as more information becomes available.

The experts at WageWatch want you to know how important it is to be aware of the new policies under the Affordable Care Act and their effect on small businesses. Employers need to properly plan for the future by developing accurate budgets that take the changing costs of healthcare benefits into consideration for the year 2013 and beyond. For assistance with your budget, WageWatch offers cost-effective reports, including salary, wages and benefits survey data. To learn more about the services provided by WageWatch, please call 480-237-6130 or contact us online.

 

Posted in Regulatory & Legal Updates on December 12th, 2012 · Comments Off on The Impact of the Affordable Care Act on Business

Not All Salary Surveys are Created Equal

With traditional annual salary surveys, the process of data collection starts when the survey opens. The opening is followed by a window of time that is typically two to four months, and sometimes as long as six months. This survey window depends on the industry and number of positions surveyed, for which survey participants would report their payroll data for incumbents. At the end of the collection period, the survey closes and no additional survey participation can occur until the following year when the survey cycle is completed and the survey reopens. The date the survey closes to participation is referred to as the survey’s effective date.

Once the survey closes, the wage data is manually cleaned, analyzed, and the findings formatted into a compensation benchmark report. Building the report in this manner can take an additional two to three months and for some compensation surveys up to six months. Once the report is complete, it is made available to participants and is on sale until next year’s compensation report is published.

The traditional annual compensation survey, by design, reports last year’s data. Compensation professionals know the value of using the most update-to-date market data available to conduct their benchmarking and wage analysis.  WageWatch has responded to this need with salary surveys and benefit surveys that collect and report the most current data – never last year’s data. HR directors and compensation managers know the effective date for each participant. This approach creates a survey platform that is dynamic, never closes, and reports the most current market data available.

WageWatch uses the next generation methodology based on a 365-day subscription period that allows participants to continually update data and report findings during the year. WageWatch defines the effective date as the date on which wages are internally updated in an organization’s payroll system. WageWatch’s survey platform is dynamic and not static as are traditional annual salary surveys. While Wagewatch does have a close date for its compensation surveys, which would normally be referred to as the effective date in a traditional survey, this is a soft close date.

Because our surveys are dynamic compensation surveys, we continue to accept participants’ wage data after the close date of the survey.  Users can subscribe after the soft close date, enter their data and create their own custom reports all in the same day.  WageWatch reports allow you to select an entire market to compare your in house salary data, or you can select as few as five competitors you select to compare your salary data. This report is known as the WageWatch PeerMark™ Survey report.

Posted in Survey Reports on December 5th, 2012 · Comments Off on Not All Salary Surveys are Created Equal

Employee Health Benefit Trends to Watch for in 2013

Employee health benefits will continue to be an important issue to both employers and employees in 2013. With the election behind us, employers are looking to the future and working to determine the impact that recent healthcare reform will have on their business. In 2013 businesses will work to establish a balance between working within the regulations of the Patient Protection and Affordable Care Act (PPACA) while attempting to keep the costs of employee health benefits down.

Even with the rising costs of healthcare, many employers remain committed to providing their employees with attractive and comprehensive healthcare benefits. After reviewing benefits survey data, along with the healthcare coverage trends of 2012, the following predictions can be made for 2013:

Rising Costs

As healthcare costs have risen over the years, employers have been faced with the constant struggle of providing adequate healthcare benefits while keeping within their set budgets. According to benefits survey data, employers are budgeting with the expectation that healthcare costs will rise about 7 percent in 2013. To offset this rise in costs, many employers will raise insurance premiums by an average of 5 percent.

New Healthcare Plan Options

The majority of employers in 2013 will offer high deductible plans as a healthcare coverage option. Many of these plans will include a health savings account, allowing employees to invest money free of taxes to pay for healthcare. These plans are a significantly less expensive option for employers, leading many of them to offer incentives with the plans. Approximately 43 percent of businesses surveyed plan to offer a $500 contribution into each employee’s health savings account for selecting a high deductible health plan.

Increase in Wellness Programs

Many businesses are encouraging employees to be proactive in improving their own health. Utilizing tools like wellness programs and incentives, employees are rewarded for improving health habits to avoid costly, preventable conditions, such as diabetes, obesity and cardiovascular disease. According to benefits survey data, 61 percent of employers cited poor health habits as the largest challenge to providing affordable healthcare benefits. To counter this problem, 48 percent of employees plan on using incentives to increase participation in preventative health care programs.

These predictions, based on benefits survey data, will help assist businesses to develop the budget and plan for the changing costs of healthcare benefits for the 2013 year. For assistance determining future employee compensation, WageWatch offers cost-effective reports, including salary, wages and benefits survey data. To learn more about benefits survey data and other services provided by WageWatch, please call 480-237-6130 or contact us online.

 

*Data provided by the National Business Group on Health Employer Survey on Purchasing Value in Health Care.

Posted in Benefits & Compensation on November 28th, 2012 · Comments Off on Employee Health Benefit Trends to Watch for in 2013

Market Analysis: Median or Mean

Median and mean are useful measures of distribution that identify central values and tendencies of a data set. In a WageWatch compensation survey, median is the middle wage in a set of ranked market wages, which separates the data set in half. When an even number of wages are ranked, with no true middle value, the average of the two middle data points is the median wage. Median is also called the 50th percentile.

The arithmetic mean which is also called the simple average or mean is one of the most commonly used statistics in business. One of the reasons is that it is very easy to calculate. It is the sum of all values of a data set divided by the number of values in that set.

In a normal distribution of data, the median and mean wages will be within a few cents of each other. When the mean is greater than the median, this indicates the data set is skewed towards higher wages. Similarly, when the mean is less than the median, this indicates the data set is skewed towards lower wages. Skewing typically occurs for one of two reasons: either the data set is not normally distributed, or the mean is affected by outliers or errors in the data set. The first situation is not uncommon and occurs when there is either wage compression or the data is bimodal, meaning that the job description may be too broad and need to be bifurcated into two job titles. The second reason for the mean and the median being significantly different, due to an outlier or data error, is much more of a concern.

Here is an example of how data affects the median and mean differently when an outlier is added to the data set.

Wages in Data Set A                                                        Wages in Data Set B
$9.25                                                                                      $9.25
$10.11                                                                                    $10.11
$10.56                                                                                   $10.56
$11.98                                                                                    $11.98
$12.50                                                                                   $12.05
$12.88                                                                                    $12.31
$125.00

Set A Median Wage $11.27                                          Set B Median Wage $11.98
Set A Mean Wage $11.21                                              Set B Mean Wage $27.32

In this example, it is clear that once the $125.00 value is added as an outlier, the median wage becomes the better indication of the central value. Comparing the median with the mean from Set B tells us that while the middle wage or median is $11.98, there appear to be employers paying at the top of the market, skewing the mean up sharply. The only way to know for certain if the difference between the median and mean is due to an error is a more thorough analysis of the data. If more data analysis is not possible, then the median is your better statistic to use.

WageWatch, Inc. is the leading compensation survey provider for over 5,000 hotels, non-profits organizations, healthcare organizations and management companies. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes.

HR Outsourcing: The Pros and Cons

With the state of the current economic climate, businesses have been forced to make crucial budget cuts. Human resources, as well as other departments, have experienced a decrease in the number of staff members or have been eliminated altogether. With far fewer resources, the remaining staff members are left with the responsibility to manage the workload previously done by many more employees.

The Human Resource (HR) department is at the heart of every organization. It is essential that the HR Department be run efficiently and effectively, even with limited resources.  To ensure that the HR department tasks are carried out, many business owners have begun to outsource some or all of the departments function to provide HR services and data, including compensation surveys.

When considering outsourcing the human resources department, consider the following advantages and disadvantages:

Advantages

Savings: Businesses will pay far less for outsourced services than they would on a dedicated employee fulfilling the HR role. Many of the companies offering HR services only charge for the services that the business uses. For example, a business owner will accumulate savings by paying for recruiting services on a case by case basis rather than providing a full-time recruiter’s salary.

Efficiency: Upon outsourcing the HR tasks, businesses are able to use their limited resources to focus on building and expanding internal operations. The cost savings allow businesses to allocate funds to other departments, increasing marketplace competitiveness. Additionally, providing the HR department with wage, salary and compensation surveys will increase the effectiveness of operational decision making.

Process: HR outsourcing companies offer a great deal of expertise on the HR industry and are able to implement processes that are efficient while falling within all legal regulations. After thoroughly analyzing a business and its structure, outsourcing companies are able to recommend standardized processes, such as training, hiring and retaining employees.

Disadvantages

Expertise: An internal HR department is a valuable asset for businesses. Without one, there is no central hub of expertise with information on employee training and business operation processes. Each business operates uniquely, so it may be difficult for an outside company to understand how alterations in processes can affect employees.

Cultural: Without an internal HR department, employees lose the personal connection of working directly with the team that sets corporate policies, provides training, and manages payroll. This may lead to feelings of resentment that the outside HR team does not have the employees best interest at heart. Employees appreciate the sense of security in having an in-house HR team, who are there to serve them, a feeling that is difficult to recreate when outsourcing HR functions.

In order to achieve operational effectiveness, businesses must provide HR departments, outsourced or internal, with the proper resources, such as wage or compensation surveys, to make decisions that are beneficial to the organization and its employees. WageWatch provides wage, salary and compensation surveys and reports, with data from over 108 markets. With this information, HR departments are able to compare data across national, regional, state, city or property. To learn more about compensation surveys, please call 480-237-6130 or contact us online.

Lodging Industry 2012 Wage Increases- Part 2

As reported in last week’s iBrief Blog, the lodging industry experienced across the board wage increases for both hourly and salaried employees this year. Overall, wage and salary increases were reported as 2.6% for 2012, which was almost double last year’s increase of 1.4%, as reported by WageWatch in its PeerMark™ Wage Survey of over 5,000 hotels nationwide. Last week, the iBrief Blog focused on hourly increases. This week in the Blog, we will review wage increases for salaried employees.

Managers in key front of the house and back of the house positions received salary increases in excess of the average wage increase of 2.6% reported in last week’s iBrief Blog. The largest salary increase went to Chief Engineers, who on average received a 17.6% pay increase in 2012. This trend is a continuation of what WageWatch reported last week where maintenance technicians I and II received on average 5.5% hourly wage increases. Pay for experienced technical positions continue to lead the way.

Other key management positions receiving above average salary increases in 2012 include front desk managers at 3.7%, marketing and sales directors with 3.9% average increases and food and beverage directors with a 4.3% average salary increase.

As reported last week, there was little difference in the wage increase for full service hotels and focused service hotels. However, the results of the Wagewatch compensation survey for salaried employees do show some differences between full service and focused service hotel employees. The most notable difference was the salary increases for general managers. Overall, general managers received a 1.9% increase in average base salaries; however, focused service general managers on average received only a 1.5% increase while their counterparts at full service hotels received on average a 3.5% increase. The number of full service and focused service hotels surveyed in 2011 versus 2012 was not statistically significant.

Another key trend we are beginning to see emerge in the lodging industry is the hiring of more college graduates to the fill the ranks assistant managers and the management training programs. Our ongoing discussions with hotel management companies as well as with the AH&LA discloses a need for filling entry level management positions that were reduced during the severe national recession of 2008-2009.

This is a trend worth watching. If the economy continues to improve next year and rate and occupancy levels continue to climb to the degree they have the past two years, we will begin to see increased interest on the part hotel management and ownership companies to explore expansion programs. Having a strong bench of middle level managers that can fill the positions at new hotels will be critical to their plans.

WageWatch, Inc. is the leading compensation survey provider for the lodging industry with over 5,000 hotels participating in its PeerMark™ Wage survey. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes.

Lodging Industry 2012 Wage Increases- Part 1

The year 2012 will be remembered as the comeback year for hourly wage and salary increases for the employees of the lodging industry. The industry had across the board wage increases for both hourly and salaried employees as reported by over 5,000 hotels in the WageWatch hospitality compensation survey for 2012. Overall, wage and salary increases were reported as 2.6% for the year, which was almost double last year’s increase of 1.4% reported by WageWatch in its PeerMark™ Wage Survey for 2011 and follows a period of wage stagnation reported in the industry from 2008 to 2010.

This past January, WageWatch surveyed over 3,400 hotels and disclosed in its 2012 wage forecast budgeted pay raises averaging 3% for exempt and nonexempt employees in the lodging industry. The median and mode were also 3%. There was also very little difference between full service hotels and limited or select service hotels, with the later budgeting 2.9%.

Compensation increases reported in the WageWatch wage survey for the lodging industry as of October 23, 2012 shows little difference between the percentage wage increases for full service hotels and limited or select service hotels for similar positions. This is the first year since 2008 that limited/select service properties have kept pace with their full service brethren.

Pay raises for 2012 came in the face of slower than expect economic growth in the U.S. The consensus economic forecast last December was for economic growth in the range of 2.0 and 2.5 percent for 2012. Through the third quarter of 2012, economic growth is estimated to be mired at 1.7%. In spite of this lackluster economic performance, the lodging industry continues to strengthen.

The President of WageWatch, Randy Pullen, stated earlier this year that he expected strong wage increases, as well the as the WageWatch forecast for an increase in lodging employment of an additional 25,000 jobs, to come to fruition as the lodging industry continues its post-recession improvement in both occupancy and rate.

Interestingly, if the lodging pay raises are examined at a more detail level, several “hot jobs” or hard-to-fills jobs can be identified nationally as well as in several city markets. We will focus on a few of the hourly jobs for the lodging industry this week and take a close look at salaried jobs in next week’s Blog.

Front of the house and back of the house wage increases were essentially the same, with front desk agents receiving on average 1.8% increases, while housekeepers and house persons received 2.4% and 2.1% increases. The relatively smaller increases for these positions when compared to the lodging industry average is not unusual as they are entry level positions with higher turnover, which results in the starting wage rate having more impact and are tipped positions In the hotel kitchens, bakers and cooks received 3.2% and 2.1% pay raises. Again, cook is an entry level position and more dependent on the starting rates, which changed very little from year to year.

The biggest increases for hourly workers went to the maintenance department with maintenance technicians I and II receiving on average 5.5% pay increases. Qualified maintenance technicians are hard to find due to multi-industry demand on this skill set and are considered to be hot jobs.

At the supervisor level, housekeeping supervisors received on average a 2.3% increase while front desk shift supervisors received 2.9% increases and night auditors receiving 3.7% increases. In the kitchens, sous chefs received on average 2.9%.

Next week, we will review the salary survey increases in our blog. Needless to say, the maintenance department does well with chief engineers receiving on average 17.6% increases … more next week.

WageWatch, Inc. is the leading compensation survey provider for the lodging industry with over 5,000 hotels participating in its PeerMark™ Wage survey. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes.

Performance Review of Employees

Performance reviews are meetings scheduled with employees to analyze the performance of assigned responsibilities within the workplace. They are designed to help managers assess the abilities of each employee, praise workers in areas they are doing well, identify areas that can be improved, design training to further development, and set goals for the future.

It’s no secret that both managers and employees can come to dread performance reviews as the process can cause a great deal of stress on both parties. If done right, however, the review process will help employers create a more productive workplace. The following is a list of tips to conduct an effective performance review:

Continuous Feedback

A review should be an ongoing process conducted throughout the course of a year. An employee cannot be evaluated fairly with a review process that is done over a very short period of time. As a manager, you should check in on your employees regularly to assess how they are accomplishing their assigned tasks. Take notes on how they go about completing these tasks, both the things they are doing well and those that could use improvement.  Having this on file over the period of a year will allow you to conduct a thorough, accurate performance review. This is will reduce the stress levels going into the review as there will be no surprises.

Gain Insight from Co-Workers

Talking with people who work closely with the employee will help you to gain further information on the strengths and weaknesses of the individual. This is known as a 360-degree review and can include feedback from co-workers, customers, vendors, and subordinates. These are the people who likely know the worker best as they interact with them the most, so it is beneficial place to go for further insight.

Provide Information Ahead of Time

Inform your employees about how the review will be conducted and how their performance will be evaluated ahead of time. Some managers provide the employee with their evaluation form before the review, so they are able to process it and have an emotional reaction alone as opposed to feeling blindsided and flustered in the face-to-face meeting. This provides employees with the framework of what to expect and will reduce some of the anxiety that comes along with a performance review, making the process smoother and more effective. It also allows the employee to perform a self-assessment using the same criteria as the manager.

Have a Conversation

Treat your employee respectfully by actually participating in a conversation with them. While it is important for you to discuss their performance, you shouldn’t be doing all the talking. Make sure you are engaging with the employee by asking questions and actually listening to what they have to say. You should document the employee’s feedback directly on the performance review document. Sitting in a room and lecturing the entire time will make that person feel attacked and uncomfortable, and will make them less likely to open up to you. The process will be much more effective if you understand the employee, so you are able to focus on the best strategy for improvement in the workplace.

Be Goal Oriented

Discuss the changes and additional expectations in the individual’s job description as they approach their next year. Providing the employee with a list of personal goals during the review session will help them to understand their part in achieving the overall goals of the company. In this conversation, you should convey support for the employee and excite and encourage them to improve, even if they are already a top performer.

WageWatch can help you to establish a budget for market compensation, salary ranges, including merit pay, based on a well conducted performance review. We have over a decade of experience working with industry associations and employer groups, providing online salary, wage, compensation and benefits surveys. To learn more about our services, please call 480-237-6130 or contact us online.