Strategies for Rising Hospitality Wages
Rising Payrates Lead to Effective Strategy from Hospitality Staffing Solutions
Michelle Sims, VP of Hospitality Staffing Solutions Southwestern Division, speaks about her team’s strategy for responding to rising wages in Denver and Beyond
Michelle Sims is the VP of Hospitality Staffing Solutions’ Southwestern Division. Sims’ team has worked with hotels, resorts and casinos in Denver for the last two years to smoothly navigate through minimum wage hikes that began to take effect in 2016.
With the passage of Amendment 70, effective January 1, 2017, Colorado’s minimum wage increased to $9.30 per hour and will increase annually by $0.90 each January 1 until it reaches $12 per hour effective January 2020.
Sims shares her insights into how the market reacted and outlines some strategies that can be implemented anywhere to prepare for increases imminent throughout the U.S.
Minimum wage was first raised to $9.30 an hour effective on January 1, 2017. What was the market reaction in Colorado?
In 2017, we saw that employers throughout many sectors including food service, hospitality, and retail, were raising their payrates beyond the minimum wage. And they were doing this prior to the wage increases were mandated to go up. I think that took many hotels off guard. They were looking at a new minimum wage as a cost increase which was predictable and more or less an accounting issue. Instead it turned out to be a disruptive influence on the marketplace causing people to look at other places of work or across different industries. Many businesses took advantage of this pool of workers suddenly looking around at their options and were using higher
Michelle Sims is VP for the Southwestern Division of Hospitality Staffing Solutions wages to attract new employees.
Why do you think that the hike in minimum wage caused people to look for work?
I think it’s one of the unintended consequences of this kind of legislation. Pay is suddenly being discussed in a public way and it’s natural for people look around for opportunities to get ahead. With this legislation, Individuals seeking work have more options to increase their income and feel a sense of empowerment to ‘shop’ around and consider their options in an already tight labor market.
How have you worked with your clients to use this knowledge for future hikes?
We work with our clients throughout the year to prepare for the next year’s minimum wage increases. Getting ahead of those rates and beginning to offer valued employees an increase in pay mid-year heads off the large scale movement of workers at the beginning of the year. We provide them with details on pay trends in the market and work out plans for raising payrates while we also work out scheduling, volume of workers needed and employee retention activities.
Do you think this exercise is unique to the Denver market?
There are many places throughout the U.S. that are experiencing similar stepped increase to the minimum wage and many more are considering similar legislation. With unemployment low virtually everywhere in the U.S., it’s hard to imagine a market that is not experiencing some competition for employees. When a market raises its minimum wage, it intensifies that competition but it’s always there. Wages are increasing as employers compete for a shrinking pool of qualified employees. A minimum wage hike due to legislation just makes that increase more clear-cut.
What lessons can you share from your experience in Denver?
First, you have to get ahead of the curve when it comes to raising your rates. Do it in advance of the deadline and consider raising rates above the minimum. When the deadline hits, you’ll have a lot more employers flooding the market looking to fill open position and a lot more employers offering higher wages to fill much needed positions to run their business. Timing is everything and I would say that it’s never too soon to start mapping out a strategy.
Also, employers should look at their total package when it comes to what they offer employees. There are many things that workers value beyond a larger paycheck. But don’t lose sight that in the Denver market, the pay rate is the foundation for recruiting and the additional benefits and the environment, along with their pay rate, is the foundation for employee retention.
What are some of the actions employers can take to retain and attract employees?
Flexibility in scheduling and time off can have a huge influence on whether an employee stays or not. When it comes to coordinating child care or the care of an elderly adult, which is on the rise, that scheduling is often worth more than more money in a pay check. Also, predictability when it comes to scheduling is another major factor.
Why do you think that’s so important?
In an on-demand culture, we forget that other obligations in life are not on-demand. For example, it is easier for an employee to plan their personal obligations around a predictable work schedule that remains consistent month after month, or at minimum, each week. On-demand is fine where it’s appropriate, but it comes at a cost which is often reflected in the hourly wage.
What are some other factors that HSS works with its clients on?
HSS very much keeps the fair and ethical treatment of employees’ front and center. We have very thorough and stringent policies regarding pay, fair treatment, and safety. We believe these are factors in reducing turnover because employees know they are treated well by HSS. But we also work with our customers to further enhance the employee experience. Our employees need to feel that they are part of the team. HSS helps by contributing to and participating in team building activities at the property and attending regular weekly department meetings.
Staffing agencies doesn’t always have the best reputation when it comes to employee satisfaction. At HSS we strive to not only find talented and reliable employees, but work with our employees to keep them on assignment at a hotel or resort. Anything that might result in higher turnover is a red flag for us. Often times this has to do with wages, scheduling, other incentives, but sometimes there are issues with the treatment or inclusion of contract employees. In these cases, we have to be very careful but have frank conversations with employers about suggested changes to mitigate and reduce turnover.
What advice do you have for hotels across the country about the future of wages increases?
We’re at a unique time in history when you have low unemployment combined with legislation from state to state and city to city about wage increases. It’s important to get ahead of that conversation and find out where wages are moving organically in your region.
HSS has payrate research that we share with our clients. This research looks at a comprehensive snap shot of a region to see what the entire spectrum of employment looks like for lower wage hourly workers. We’ve found that clients that are not moving their payrates are seeing the market move around them and they are missing a competitive edge. So what was an attractive wage a year or two ago is now in the bottom 10th percentile of pay and our pay rate reports show our clients the raw data to assist in decision making. Without reacting positively, the result is higher turnover, lower quality and an overall less efficiency.
How can payrate impact efficiency?
Time and money is spent on recruiting and training. If you’re in the lower percentiles of pay rates, you are probably going to have increased turnover. That means more time and money spent on recruiting and training and probably increased overtime. You’re also putting additional stress on your current employees which might lead to increased turnover for them. Looking at pay rates as a competitive strategy long-term is the best approach. While Denver provides an example of what happens in one market with new legislation, the rules apply across the entire country. We’re encouraging our clients to look, in many cases, 6 months ahead. This forward looking strategy helps them compete more effectively for a pool of workers and ultimately sets up a hotel for success in staffing and really, its entire business. With the competition in the hospitality industry overall, and the decreasing supply of talent, we believe our clients can’t afford not to engage in pay rate discussions and react in advance.
Are you looking for a staffing agency that is looking out for you? HSS works with its clients to determine competitive payrates and recruit the qualified candidates you need to build business. Click here to contact us for more information.
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