WageWatch Ibrief Blog

Login

Archive for January, 2013

The Pros and Cons of Merit Pay

Merit pay is a compensation strategy that is used to motivate employees with pay increases for positive performance outcomes. This system is one that is heavily debated among businesses throughout a wide variety of industries. Every business has its own unique structure and culture, and must decide what payment system works best for them based on a set budget developed from salary reports. If you are thinking about establishing a merit pay system for your company, it is important to understand both the pros and the cons:

Pros

– Statistically, merit pay is one of the most effective methods for motivating employees to perform at their peak, which allows them to achieve high levels of productivity.

– This pay system promotes healthy competition among employees, encouraging each to work hard to achieve their very best while also delivering great results for the company. Employees enjoy being recognized among their co-workers and upper management for a job well done.

– The brightest and most skilled employees can easily become unmotivated. With a merit pay system, however, motivation is achieved. High performers are well aware of their skills and enjoy using them in challenges to achieve goals that are linked to monetary incentives. Merit pay gives these employees the recognition and reward they deserve and also helps companies to retain their best employees.

Cons

– Merit pay systems can cause conflict among employees. Some may feel that the system is unfair because no matter how hard they work, they may not be able to earn any incentives. This leads employees to feel unmotivated and unimportant. This is primarily due to inadequate performance appraisal systems leading to inconsistencies among raters.  And the performance appraisal ratings are the basis for the merit pay.

– Merit pay systems can garner healthy competition, but they also may lead to the disintegration of team unity. If everyone is in it for themselves, problems could arise. Personal goals may become more important than team goals, which is not beneficial for the company as a whole. Top performers may also be seen as more valuable and important than others, leading to feelings of jealousy.

– It can be challenging in the current economy to adequately distribute merit pools of 2% or 3% and still award your top performers adequately

For the most part, merit pay is a method that is generally accepted and tends to work for most businesses. It is important, however, that you still weigh the pros and cons before carefully choosing a payment system that works the best for your business and its unique culture. All incentives should be those that will be meaningful to employees. As such, businesses must provide incentives that are competitive with compensation being provided to top performers at other companies. Salary reports can provide you with this data.

At WageWatch, our professionals can provide your business with compensation surveys and salary reports to help you establish a budget for your merit pay program, including bonuses and incentives. Our innovative company is a leader in the collection of data for surveys and salary reports, which allows us to provide services to a wide range of industries in both the private and public sector. To learn more about our compensation surveys, salary reports and other services, please call 480-237-6130 or contact us online.

 

Compensation Committees

Compensation committees are an appointed group of individuals that have corporate governance over compensation and benefit programs for executives and company officers. The committee is typically chaired by the CEO and composed of both inside management directors and outside independent directors. Their work includes determining the types of pay plans, the amount of compensation and the performance measures that the executives will be upheld to in regards to the calculation of incentives.

Compensation committees play a strategic role within the business by aligning company performance and executive rewards. Individuals within the committee must create a compressive program, with the aid of compensation surveys and consultants, which motivates executives to achieve the overall goals and objectives of the company within their own positions. High performance is best achieved through the implementation of a strategic merit pay program, short and long term incentive plans including stock awards, retirement, and executive perquisites.

In addition to strategy, compensation committees also play an administrative role. They are responsible for completing studies, evaluating alternative compensation plans and outlining the compensation package. Compensation Committees often times have oversight over complex human resources issues such as equal opportunity and pay, executive succession planning, and director evaluation issues. How much oversight Compensation Committee has depends on many factors including composition of the committee, management engagement, corporate culture, and regulatory environment.

Over the years, executive compensation has become a rather large issue in the media. There are numerous media watchdogs that have the ability to relay information to the public more quickly than ever before. In addition to increased media attention, executive compensation has also seen tighter government regulation. Committees must accurately address the expectations of board members and investors. To keep investors happy, the executives must stay motivated to achieve the established business goals and objectives. Therefore, committees have an extremely important role in designing merit pay programs.

An effective executive compensation program will include performance evaluation that is both measurable and well communicated. The rewards for delivering results need to be meaningful to executives and competitive with what other businesses in the marketplace are offering. At WageWatch, our Executive Compensation Survey and Compensation Consultants can you’re your Compensation Committee to establish a budget for salary changes, benefits and merit pay, including any bonuses or incentives. We have the experience and capability to collect data for compensation surveys, salary reports and other studies in a wide variety of industries. To learn more about how our compensation surveys can help you to develop effective and competitive compensation strategy, please call WageWatch at 888-330-9246 or contact us online.

 

WageWatch Wage and Employment Forecast for 2013

LODGING INDUSTRY 2013 WAGE FORECAST

The WageWatch 2013 survey of over 6,000 hotels nationwide in our database shows planned pay raises for hourly employees and non-exempt salaried employees averaging 2.8% with a median of 3.0% and a mode of 3.0%. The annual survey completed on January 7, 2013, further disclosed that hotels are planning on similar pay raises for their salaried exempt employees, with a mean of 3.0%, median of 3.0% and a mode of 3.0%. Randy Pullen, President and CEO of WageWatch stated, “For the lodging industry, 2013 will feel a lot like the 1993 movie Ground Hog Day starring Bill Murray, as WageWatch forecasts that pay raises for all sectors of the lodging industry will repeat raises experienced in 2012.”

If the planned wage increases for 2013 are further broken down between full service hotels and limited or focused service hotels, the survey discloses that full service hotels will, in general, have slightly higher pay increases.  Full service hotels participating in the 2013 survey disclosed an average planned pay raise of 2.9% for hourly employees, with a median and mode of 3.0%. Focused service hotels had a slightly lower average pay raise for hourly employees of 2.8% with a median and mode of 3.0%.  For salaried exempt employees, both full service and focused service hotels reported planned wage increases averaging 3.0% with a median and mode also of 3.0%.

Randy Pullen also stated, “While hotel companies are planning on pay raises of between 2.8% and 3.0% for 2013, it is likely that actual wage increases that will be reported later this year by WageWatch in its 2013 hotel wage survey will be two or three tenths of a percent less than the forecast.  We saw a similar trend last year where actual wage increases for the lodging industry as reported in our iBrief Blog of October 24, 2012 Industry 2012 entitled Wage Increases- Part 1, were lower than the forecast, coming in at 2.6%.”

LODGING INDUSTRY 2013 EMPLOYMENT FORECAST

This year will see continued employment growth in the Accommodations segment of the Leisure and Hospitality super sector as reported by the U.S. Bureau of Labor Statistics. The U.S. saw significant gains in employment for the Lodging Industry the first half of 2012 as indicated in the following table:

 

WageWatch had forecast employment growth seasonally adjusted on average of 25,000 jobs in 2012 vs. 2011.  As the year progressed, hoteliers became more conservative and did not hire as many seasonal workers during the summer months, which pulled down the average for the year.  WageWatch attributes the pullback directly to the political uncertainty of the election year and the looming fiscal cliff impasse at yearend. This conclusion is based on the continued strong economic recovery that the industry experienced in 2012, which should have translated into more employment gains.

Our forecast for last year of a 25,000 increase in employment was based in part on the PKF Hospitality Research, LLC’s national econometric forecast of the U.S. Lodging markets for 2012.  Actual performance for 2012 was better than forecast by PKF, with 61.5% occupancy, a 1.6% increase over 2011 yearend 59.9%.  Actual Average Daily Rates came in slightly lower than forecast. Overall, RevPAR increased by 6.8%.  Net operating income was forecast to increase by 12% for 2011 over 2010, a strong performance on the back of an 18% increase for 2010 over 2009. This level of growth in the lodging industry should have supported an increase of 25,000 jobs in 2012.

Looking ahead to 2013, most leading economists are forecasting continued slow but steady growth of the U.S. economy in the range of 2.0% or better. Expectations are for slow growth the first part of 2013 with stronger economic growth the second half of the year. This should result in continued growth for the lodging industry. Smith Travel Research is forecasting an increase in occupancy of 0.3% and an Average Daily Rate increase of $4.86 for the lodging industry, with RevPAR increasing by 4.9% for 2013.  PKF Hospitality Research is slightly more optimistic with a RevPAR increase of 6.0% for 2013. Overall, the improving Average Daily Rate and occupancy numbers for the lodging industry will lead to stronger income statements for hotels, with net operating income growing by double digits in 2013.

Based on continued economic growth in the U.S. with the economy strengthening midyear and strong financial performance forecasts for the lodging industry for the year 2013, seasonal employment should increase significantly this summer with the Accommodations segment rebounding strongly, with employment growth of 20,000 jobs for the year. This will bring employment levels slightly above yearend 2008 levels, but still 50,000 jobs below the peak for yearend 2007.

 

Posted in Wage Forecast on January 9th, 2013 · Comments Off on WageWatch Wage and Employment Forecast for 2013

WageWatch Looks Ahead to 2013

 

The New Year began with our political leadership in Washington, DC finally reaching an agreement on a permanent tax cut for 98% of Americans.  No longer will it be known as the temporary Bush tax cuts. It was not pretty to watch, but it was instructive. It marks the first of many more compromises that will be made during the year to begin the process of reigning in deficit spending and stabilizing our Nation’s debt crisis.

What does this mean to the U.S. economy and to employment for 2013?  Essentially, it is good news. This should not be as a surprise for most of our readers, but it probably means more of what we experienced in 2012.  A slow growing economy with employers cautiously hiring for critical positions, while trying to understand how the Affordable Care Act (ACA), better known as Obama Care, will impact their costs and employee insurance plans.

Most economists agree with this scenario of slow growth with the possibility of the economy picking up speed later in the year if the private sector gains confidence in the future stability of the U.S. economy.  WageWatch will have more to say about the economy and the impact it will have on this year’s wage increases for the hotel and gaming industries when we publish our Employment Forecast 2013 next week. The forecast is based on our survey of over 4,000 properties late last month.

Looking at other trends for 2013, clearly, the ACA has garnered the most headlines during the year.  As we have previously reported, 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. We are already beginning to see examples of employers cutting back on the number of fulltime employees by reducing their hours. Also, look for small businesses with more than 50 employees to reduce their workforces or change the structure of their companies.

One bit of good news is the IRS ruled this past Monday that affordability does not extend to fulltime employees’ families. Under ACA, employers will have to offer insurance that is certified affordable only to employees. To be certifiable as affordable, 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 will 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.

Finally, WageWatch welcomes our newest employee, Debra Anundson, who joined us on January 1st as our new Manager of Compensation Analytics.  Debra was with Interstate Hotels & Resorts for 22+ years, where she served in many capacities in Compensation and Benefits at the corporate office, managing all facets of their compensation, health & welfare and retirement benefits.  She created salary structures for exempt and nonexempt positions in all divisions as well as the corporate headquarters.  You can read more about Debra in the press release.

WageWatch, Inc. is the leading compensation survey provider for the lodging and gaming industries with over 6,000 properties in our database participating in its PeerMark™ Wage survey. WageWatch also conducts compensation surveys the healthcare, staffing and non-profit industries. 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.