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Archive for March, 2014

Potential Revisions to Federal Overtime Regulations

On March 13, President Obama directed U.S. Secretary of Labor Thomas E. Perez to “modernize and streamline” the Department of Labor’s (DOL) overtime exemption regulations that define the scope of the exemptions under the Fair Labor Standards Act (FLSA).  

 Under the Fair Labor Standards Act, non-exempt workers are paid overtime for all hours worked over 40 hours in a workweek at one-and-one-half times their regular hourly wage.  An employee is not entitled to overtime compensation if their job meets the requirements of certain exemptions.  To be exempt from overtime pay, a job must pass one of the specific job duties tests as well as be paid a minimum salary specified by the FLSA.  The specific job duties tests are the executive, administrative, professional, outside sales, and computer duties tests.   Currently, the salary minimum requirement is $455 per week which was set in 2004. 

 According to a White House Fact Sheet, the equivalent to $455 per week in 2004 in today’s dollars is $561 per week.  And due to annual inflation, only about 12 percent of workers fall below the $455 per week threshold.  Approximately 18 percent of workers fell below the threshold in 2004 when the minimum salary requirement was raised from $250 per week to $455 per week, and 65 percent fell below the threshold of $250 per week in 1975. 

 These regulations are recognized by some states as outdated, which is why states like New York and California have set higher salary thresholds.  New York state minimum exempt salary has been $543.75 per week since 2009, and was increased on December 31, 2013 to $600 per week.  This will increase again to $656.25 per week on December 31, 2014 and to $675.00 per week on December 31, 2015.  Exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment.

 It is unknown what the final changes to the current regulations will be, but according to President Obama’s Memo to the Secretary of Labor, and the White House Fact Sheet, the objective is to update the existing protections to keep with the original intentions of the Fair Labor Standards Act, to address the changing nature of the American workplace, and to simplify the overtime rules to make them easier for both workers and businesses to understand and apply.  The most likely targets for change to the overtime regulations are an increase to the minimum salary level requirement, perhaps even with annual adjustments for inflation, and revising some of the vague and outdated language in the job duties tests.

Many industries are expected to be impacted by the potential proposed changes, especially retail, restaurant and hospitality industries with managers and supervisors paid at the lowest levels of compensation.  The healthcare industry may also be impacted as well as the Information Technology industry if the computer professional exemption is further clarified by the FLSA possibly increasing the number of non-exempt computer professionals.

WageWatch, Inc. is the leading compensation survey provider for the lodging and gaming industries with 6,000 properties participating in its PeerMark™ Wage Survey. WageWatch also conducts compensation surveys for other business and industry segments including healthcare and non-profits. 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.

Posted in Uncategorized on March 26th, 2014 · Comments Off on Potential Revisions to Federal Overtime Regulations

Impact on Lodging Industry Of Federal Minimum Wage Increase To $10.10

Increasing the minimum wage to $10.10 could significantly impact the lodging industry across the United States particularly in states where the minimum wage is currently at the federal level of $7.25 per hour.  In order to better understand the potential impact of raising the federal minimum wage by $2.85, nearly a 40% increase, WageWatch analyzed wage data in states with current minimum wage rates below $8.00 per hour for which it has current and statistically valid data in its PeerMark™ Compensation Survey.

In all markets analyzed, with few exceptions, the proposed minimum wage increase of $2.85 raised the average and median pay for entry level positions in the lodging industry and would lead to what is referred to as wage expansion. This condition typically occurs when employers raise the  wages of  current line employees, supervisors and managers to compensate for the effects of wage compression caused by the higher-than-normal wages of new employees.

The issue of wage expansion and the negative effect it would have on the lodging industry is best illustrated by examining how it would affect the lodging market in a few states.  Below is WageWatch lodging industry data presented from two states for purposes of explaining the negative impact of wage expansion: Ohio, and Texas. We analyzed the front desk department in the select service market segment. The following table depicts the wages and average increase percentages to $10.10 per hour for line staff and the same increase percentage applied to supervisors and managers in order to maintain the current percent differential between supervisor and subordinates pay levels.

pay compress2 

Increasing the minimum wage to $10.10 would result in all line staff positions receiving a raise.   This would mean the starting rate for new employees would be the same as that paid to current employees with more seniority, experience, and/or high performance levels unless additional pay increases were given to compensate for the base increase. In order to maintain reasonable differentials in the pay scales for job duties, performance and experience, additional pay increases would be required.

This scenario would be repeated throughout the United States and would continue on up the pay scale as more technical positions such as maintenance techs and their supervisors, who are currently paid above the proposed minimum wage, would need to receive pay raises in order to have wages reflect their knowledge, experience and job responsibilities.

In conclusion, the unintended consequences of increasing the minimum wage to $10.10 on the lodging industry would have far reaching ramifications that could result in potential supervisor and management employee dissatisfaction due to increasing pay compression, therefore possibly leading to increased turnover, disruption in operations and ultimately to room rate increases for travelers.

WageWatch, Inc. is the leading compensation survey provider for the lodging and gaming industries with 6,000 properties participating in its PeerMark™ Wage Survey. WageWatch also conducts compensation surveys for other business and industry segments including healthcare and non-profits. 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.

Posted in Uncategorized on March 20th, 2014 · Comments Off on Impact on Lodging Industry Of Federal Minimum Wage Increase To $10.10

Merit Matrix

The first merit matrix was introduced in the early 1970’s.  At that time merit pay was seen as a great way to manage employee performance and it seemed to work well with pay increases in the double digits.  Today is a different story, trying to incorporate a performance element when budget increases are 2 or 3% is difficult at best.  A merit matrix allocates budgeted dollars to employees based on two factors: 1) their performance; and 2) their salary’s position in the salary range and/or in the market.  However, the merit matrix may not be in line with your compensation philosophy nor meet your salary administration needs by allocating dollars to where you need them most.

 Many companies do not have a separate budget for market adjustments and rely on merit increases to remain competitive.  However, employee pay can quickly fall behind market if the merit budget is 3%, and the market is increasing at a greater rate.  When merit increases are not keeping step with the market, pay compression may result.  You may be faced with having to hire new employees at higher rates than current employees.

 In spite of the potential drawbacks, merit increases are still prevalent, and are the primary ‘pay for performance’ vehicle in many organizations.  Changing the merit pay ‘mindset’ and employee expectations can seem like a monumental task.  But there are many organizations considering other ways to pay for performance such as carving out a portion of the salary budget for key contributors.  Since ‘average’ performers represent the majority of your employees, they are designated to receive ‘average’ increases, and this allocation accounts for the majority of your budget.

 Some organizations are moving from the merit matrix to multidimensional decision tools that use several factors adding further differentiation especially among the ‘average’ population. These factors can include such things as long-term potential, sustained performance over time and specific skill sets.  The factors can also be weighted differently.  When selecting factors, ensure they align with the organization’s HR strategy, job value, and compensation philosophy.  Variable pay plans can be added and some organizations have even replaced merit pay completely with variable pay, but this can increase the risk of losing top-performing employees. However, variable pay plans that include an individual component can be an effective reward for top performers.  Another more radical approach is to tie nonmonetary elements within the total rewards package to individual performance.  For example, flexible work arrangements, additional paid time off, and career development. 

For the near term, merit budgets are expected to remain small; therefore, organizations that plan to continue with merit pay systems should minimally look for ways to improve their current system.  Organizations that take the time to develop and use methods and tools other than merit pay should see a return on investment. 

WageWatch, Inc. is the leading compensation survey provider for the lodging and gaming industries with 6,000 properties participating in its PeerMark™ Wage Survey. WageWatch also conducts compensation surveys for other business and industry segments including healthcare and non-profits. 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.

Posted in Uncategorized on March 13th, 2014 · Comments Off on Merit Matrix

Hotel Industry Salary Increase City Comparison

In the WageWatch blog on 2/20/14, we reported that based on the WageWatch PeerMark™ Wage Survey of over 4,900 hotels for 2013, US national wage and salary increases were reported as 2.7% for the year, which was comparable to the increases in 2012 of 2.6%, and twice the annual increase of 1.4% in 2011. There was no statistical difference in wage increases for limited or select service hotels and for full service hotels in the survey.

Now let’s zoom in on a few select cities and see how they compare to each other and the national average.  We’ve run WageWatch PeerMark™ Wage Surveys for select cities and select hourly positions’2013 salary increases.  For full-service hotels we surveyed Housekeeper, Front Desk Agent, Steward, Bell Person and Administrative Assistant.  For select-service hotels we surveyed Housekeeper and Front Desk Agent.

Below is a chart illustrating the average percent increases from 2012 to 2013 in seven cities for both full-service (FS) and select-service (SS) hotels.  Chicago and Phoenix/Scottsdale have above average increases for most of the positions surveyed in the full-service hotels.  In all cases below, increases for select service hotels fell below their full-service counterparts. However most of the select-service hotels reside in the outer city limits or surrounding suburbs versus most of the full-service hotels are in downtown and inner city markets. The negative increases would be due to turnover, new positions, movement in the market, and other circumstances such as replacing positions at lower rates, and not reflective of actual salary decreases.

 city compare graph

WageWatch, Inc. is the leading compensation survey provider for the lodging and gaming industries with 6,000 properties participating in its PeerMark™ Wage Survey. WageWatch also conducts compensation surveys for other business and industry segments including healthcare and non-profits. 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.

Posted in Uncategorized on March 6th, 2014 · Comments Off on Hotel Industry Salary Increase City Comparison