Labor Updates Labor Updates of the Hotel of the Hotel IndustryIndustryMeghan Clark & Olivia KobayashiMeghan Clark & Olivia Kobayashi

Michigan State UniversityMichigan State University

TopicsTopics

Nature of the IndustryNature of the Industry Employee turnover ratesEmployee turnover rates

Government RegulationGovernment Regulation ImmigrationImmigration Minimum wageMinimum wage HealthcareHealthcare TaxesTaxes

Union ContractsUnion Contracts State of the EconomyState of the Economy

““Fiscal Cliff”Fiscal Cliff”

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Hotel Labor Costs: Hotel Labor Costs: 30-35% of Total Revenue30-35% of Total Revenue

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Nature of the Hotel Nature of the Hotel IndustryIndustry

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High employee turnover rates: 78.3% - 95.4%High employee turnover rates: 78.3% - 95.4% Seasonal businessSeasonal business Low pay rates (52% below the average hourly Low pay rates (52% below the average hourly

wage) ***Hospitality is considered high-risk for wage) ***Hospitality is considered high-risk for wage violationswage violations

Student employeesStudent employees Unskilled labor poolUnskilled labor pool Employees unfit for customer serviceEmployees unfit for customer service

Results in higher training and hiring costsResults in higher training and hiring costs"Introduction." Motivation in the Hospitality Industry. The Incentive Research Foundation, n.d. Web. 19 Nov. 2012. <http://theirf.org/research/content/6000056/motivation-in-the-hospitality-industry/>.

Improved interview process to gauge willingness to Improved interview process to gauge willingness to work in customer servicework in customer service

Increase hourly wagesIncrease hourly wages Offer employee incentive programsOffer employee incentive programs

Could improve operational income by 19.2%Could improve operational income by 19.2% Show strong, supportive leadership from Show strong, supportive leadership from

managementmanagement Improve employee-manager relationshipsImprove employee-manager relationships Open communication policiesOpen communication policies

Provide professional development for employeesProvide professional development for employees Job enrichment, team building opportunitiesJob enrichment, team building opportunities

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Combat Labor Costs by Combat Labor Costs by Focusing on Employee Focusing on Employee RetentionRetention

Governmental PolicyGovernmental Policy

Misclassification of EmployeesMisclassification of Employees Affordable Care Act: full time = 30 hrs/wk, Affordable Care Act: full time = 30 hrs/wk,

violations of healthcare coverage results in violations of healthcare coverage results in extra taxesextra taxes

Fair Labor Standards Act: employers who Fair Labor Standards Act: employers who misclassify employees independent misclassify employees independent contractors must pay for benefits, overtime contractors must pay for benefits, overtime pay, and finespay, and fines

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HealthcareHealthcare

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Immigration ReformImmigration Reform

Significant changes to the I-9 formSignificant changes to the I-9 form Massive overhaul of format and instructionsMassive overhaul of format and instructions Fines as high as $1,100 per employee for violationsFines as high as $1,100 per employee for violations Public investigations damage reputationPublic investigations damage reputation

Hospitality employers at highest risk to Hospitality employers at highest risk to inspectionsinspections Abstain from hiring unauthorized workersAbstain from hiring unauthorized workers Provide 1-9 training to HR departmentProvide 1-9 training to HR department Implement comprehensive immigration compliance Implement comprehensive immigration compliance

policy and investigation response protocolpolicy and investigation response protocol

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Baffa, David, Nicole Bogard, Daniel Hart, Alexander Passatino, and David Pilson. "Five Key Labor And Employment Issues Hospitality Employers Need To Be Aware Of This Quarter." Seyfarth Shaw LLP. N.p., n.d. Web. 13 Nov. 2012. <http://www.seyfarth.com/publications/LE-hospitalitynewsletter-OCT>.

Labor UnionsLabor Unions

Hotel Industry is attractive for unionizationHotel Industry is attractive for unionization UNITE HERE focuses on the hospitality UNITE HERE focuses on the hospitality

industry with card-check neutralityindustry with card-check neutrality Unions can form in hotels where majority of Unions can form in hotels where majority of

employees sign for union representationemployees sign for union representation

Right-to-work states are becoming more Right-to-work states are becoming more prevalent prevalent Could be a cost savings for employerCould be a cost savings for employer

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Effects of the EconomyEffects of the Economy

““Fiscal Cliff”Fiscal Cliff” Budget Control Act of 2011 changes went into effect: Budget Control Act of 2011 changes went into effect:

payroll tax cuts, healthcare taxespayroll tax cuts, healthcare taxes Spending cutsSpending cuts Tax rate increasesTax rate increases

No consumer spending, low government spendingNo consumer spending, low government spending

What’s Next: Debt CeilingWhat’s Next: Debt Ceiling

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Future Payroll & BenefitsFuture Payroll & Benefits

Labor costs average 43.7% of operating Labor costs average 43.7% of operating expenses and increase annually 4.3%expenses and increase annually 4.3% Limited recently by increased productivity, Limited recently by increased productivity,

controlled benefits, and high levels of controlled benefits, and high levels of unemploymentunemployment

Projected growth of only 2.4% and Projected growth of only 2.4% and unemployment of 9.9%unemployment of 9.9% Higher skilled employees working for lessHigher skilled employees working for less

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Mandelbaum, Robert . "Hotel managers labor to control labor." Hotel News Now . N.p., 3 Feb. 2012. Web. 19 Nov. 2012. <http://www.hotelnewsnow.com/articles.aspx/7446/Hotel-managers-labor-to-control-labor>.

ConclusionsConclusions

Need to prepare for the future in order to curb Need to prepare for the future in order to curb labor costslabor costs

Stay up-to-date with laws and other regulationsStay up-to-date with laws and other regulations The future acts of government and the state of The future acts of government and the state of

the economy will have a significant impactthe economy will have a significant impact Hoteliers can offset predicted changes by Hoteliers can offset predicted changes by

preparednesspreparedness No way to predict what will happen, but can No way to predict what will happen, but can

stay well informedstay well informed