HRM in The Hospitality Industry - 5
HRM in The Hospitality Industry - 5
HRM in The Hospitality Industry - 5
Labourturnoverand
workforce sta bi Iity
The issue of unacceptably high rates of labour turnover within the hospitality industty has been a
recurring theme in this book in terms of the detriment to successful human resource management caused
by the lack of workforce stability created by frequent incidence of labour turnover. Indeed, the challenge
to retain more skilled employees within the industry has been a much-researched topic within every
report or study conducted into the hospitality workforce characteristics, not just in the UK, but world-
wide (see Lucas, 2004: 32-34). Too often, the hospitality and tourism sectors have topped the 'league
table' of labour turnover rates. However, there are reasons to be more cheerful than in the last edition of
this book, when it was reported that the industry norm in 2000 was 48 per cent per annum (according to
government statistics) and this was compared to a 2003 report by the CIPD that the UK's national, all-
sector average was 16 per cent per annum. More recently, however, the hospitality industry labour
turnover rate for the UK industry has been reported as declining to 31 per cent in 2009 and down again
to 23 per cent in 2011 (People 1st, 2011: 62).
It is wise to note that the recent lower levels of turnover have been recorded during a time of deep
economic recession and it would be foolish to conclude that the challenge is on its way to being resolved,
as the figure is still well above those of other economic sectors. Also, the bare statistics do not
demonstrate the real difficulty that employers are still reporting in terms of retaining the most skilled
staff and the further difficulty in finding their replacements when they do move on to pastures new. There
are also sectoral statistical differences, as highlighted in Figure 14.1.
Furthermore, the survey of hospitality employers revealed a strong belief that the industry was still
relying too heavily on transient employees, workers such as students and international 'tourist-workers',
who fund their travels by getting short-term jobs in hotels, pubs and restaurants. This practice appears
necessaty because the employers just cannot recruit and retain sufficient local staff. It also contributes to
the systemic high levels of employee turnover, and, more insidiously, may lead to a lack of effort to train
such staff with a resultant impact on the quality of customer service. The responses of hospitality
employers are summarized by sectors in Figure 14.2, illustrating the strength of feeling about the
over-reliance on transient workers.
The extent of the challenge has inevitably led to a significant amount of research into the causes and
impacts of high levels of labour turnover, much of the discussion debating the disadvantages and
dysfunctionality of such levels. There are also pertinent research notes about the potential advantages
of turnover at a healthy level, such as skills development, labour market regeneration and the 'fresh
blood' argument. This chaprer will consider the wider perspectives regarding workforce stability by
163
The employment relationship
Events 31
Visitor attractions 29
Restaurants 26
Hotels 25
Gambling 11
Hotels 69%
Tourist services 5%
Events 46%
Visitor attractions
Travel services
Gambling
164
Labour turnover and workforce stability
reference to labour turnover theory and also more recent innovative research connected with organizational
culture and emotional labour concepts.
165
The employment relationship
This psychological school places emphasis on the organization in terms of its characteristics such as
goals, values and expectations, and also on the individual in terms of the personal factors that have
resulted in their own values and thus their expectations of work and the organization. The favourable
meeting of these characteristics leads to job satisfaction, employee decision making over whether to stay
or leave the employment, and therefore to the level of commitment. The level of affective commitment
has been found to be especially significant in its potential for predicting labour turnover (Meyer et al.,
2002; Shore et al., 2006; Kuvaas, 2007).
Turnover culture
The turnover culture construct proposed by Deery and Shaw (1997, 1999) is based on their research in
the Australian hotel industry, and on an amalgamation of two sets of research output and concepts,
namely organizational culture and labour turnover. They isolated variables that gave ctedence to their
initial notion that, 'an organizational turnover culture would encourage employee intentions to leave the
organization' (1997: 380). They discovered hotel managers and employees who coexisted within an
organization culture that basically 'expected' employees to be in their job for a short period of time, a
situation where it was the norm to be dissatisfied and therefore leave. After a time, managers may come
to accept this situation as inevitable, and (even subconsciously) reduce their commitment to induction
and training programmes and other associated activities, and related to the costs of taking on new
employees. The performance and commitment of these employees is likely to be inadequate, they achieve
little satisfaction and therefore soon begin to intend to find a better, more satisfying role somewhere else.
A vicious cycle has become firmly established.
Deery and Shaw (1997, 1999) stress the importance of small work group dynamics and how such
groups influence the values and assumptions of employees, particularly new employees. They suggest
that the precursors to an employee determining to find a new job are connected with the culture of the
organization and the work group. They develop connections with the concept of absenteeism and
absence culture, and its inference that it is 'legitimate' to be absent from time to time, just as it might
be 'legitimate' to seek another job. Their research also notes the importance of the compatibility between
the individual and the organization, declaring that 'employees who do not fit the organization's task or
cultural requirements will have reduced satisfaction and commitment and be more likely to leave the
organization' (1997: 379).
The important conclusions to this hotels-based study by Deery and Shaw are that a turnover culture
does indeed exist, but also that it has two versions, as a positive turnover culture and a negative turnover
culture. The positive version emphasizes an enthusiastic work-orientation (a 'work culture' in their
term), the employee satisfied and committed to stay. Ironically this might also lead to a 'high-flying'
employee leaving, but for positive reasons, to pursue career development elsewhere. A hotel or restau-
rant chain may well still retain that talented employee by internally promoting to another unit in the
group, and developing their career within the wider organization. The negative turnover culture is
directly connected with an employee's dissatisfaction with the current job, where the employee is leaving
to get away from the current role, organization and possibly the sector. This decision to leave is not born
out of a positive perspective and outlook (that a better job is in prospect) bur rather out of a negative
determination that the employee needs to leave because of factors such as a lack of 'fit' between personal
and organizational values, or the stress of the current job, the perceived lack of organizational support
and perhaps because the supervisory management is considered to be ineffective.
Acknowledging the turnover culture concept, Rowley and Purcell (2001) prefer to consider the 'push'
and 'pull' factors in terms of the causes of high labour turnover rates revealed in their study of the
hospitality industry. Rowley and Purcell consider that positive turnover culture or 'pull' factors might
be the availability of mobility and career progression within the secror, whereas negative turnover culture
166
labour turnover and workforce stability
factors, the 'push' factors, include stress, burnout, false expectations and poor management practices
(2001: 166). Critical findings from their research included the significance of management's understanding
of 'emotional labour' issues, which will be considered later in this chapter, linked to stress and pressure on
the emotions of a hospitality worker. Rowley and Purcell suggested that labour turnover was minimized
within a supportive culture, where staff training and development were given high priority, where
managers 'inculcated a sense of value and organisational membership among their staff' (2001: 183).
167
The employment relationship
and Rowson (2000) emphasize the stress associated with this type of bar work, hurried recruitment and
training leading to early uncertainty for the new recruit in terms of their skills and confidence with
colleagues and customers. Lashley and Best (2002) highlight the influence of poor staff induction
programmes, often rushed and ineffective, somerimes non-existent due to the high staff turnover that
has itself caused the hurried and less discerning recruitment process. The significance of staff induction
(sometimes referred to as 'socialization') and initial training has also been noted within the sector by
Seymour and Sandiford (2005) and Yang (2008).
168
Labour turnover and workforce stability
Sampled departments Two large London hotels Medium-sized county town hotel
A B
analysis of the turnover rates not only at unit level, but also by department (as illustrated in Figure 14.3).
This enables managers to explore any particular reasons for disparity in labour turnover rates across
different departments, and whether there are management interventions that can be introduced by
departmental heads and managers to tackle a specific problem area. The organizational structure of
many hospitality businesses, especially larger hotels for example, mean that the overall figure for labour
turnover may mask specific 'hotspots' of very high turnover when these departments are compared with
others that perhaps have much less of a problem. Reasons for leaving are also an important element of this
analysis and HR systems such as exit interviews for leavers must be considered so that some accurate data
are available, and that actions are not just taken on hunches and departmental anecdotes.
There is also a means of analysis based on the 'survival curve', a means of identifying when labour
turnover is most critical, mapping the leavers against a time continuum. This may help to answer
questions such as: Is labour turnover occurring during the early induction period, or in the subsequent
settling-in period of on-the-job training, or at some critical point after job training when staff lose
motivation and satisfaction with their work? Such an analysis (see Figure 14.4) can indicate causes such
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0 5 10 15 20
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1 Another job 11 Retirement
2 Returned to college or school 12 Failure to retum after leave of absence"
3 Medical reasons 13 Conclusion of temporary employment"
4 Marriage 14 Reduction of labour force"
5 Relocation 15 Unsatisfactory performance"
6 Dissatisfaction with wages 16 Misconduct"
7 Undisclosed personal reasons 17 Gross misconduct"
8 Resigned without notice 18 Absenteeism"
9 Dissatisfaction with work 19 Permanent disability"
10 Dissatisfaction with conditions 20 Death"
as poor induction, ineffective skills training, poor supervision or incompetent management. Whilst
labour turnover is analysed both by department and by length of service, the actual reasons for
employees leaving needs full understanding and recording. Some employers, perhaps those within a
long-standing negative turnover culture as outlined earlier, do little or nothing about such an analysis,
whereas others obtain very detailed information. Figure 14.5 shows how one fast food company
analyses employee reasons for leaving.
In possession of such data, management may then be in a better position to consider changes and
improvements to management and supervisory practices and procedures in order to reduce labour
turnover, with the larger organizations involving the HRM team in advising on such changes. Action
may be required within the following categories:
• Wages and salaries may have fallen behind the rates offered by competitors in the local labour
market.
• Better terms and conditions may be prevalent within the employment contracts of competitors,
particularly recent entrants into the local market.
• The quality of supervision and departmental management may need to be reviewed.
• There may be uneven or even unfair work allocation.
• There may be employee conflict within shift teams, or supervisors may be fragmenting settled teams
by their rostering and shift rotas.
• Recruitment and selection, induction and training practices may need detailed analysis and review to
improve their effectiveness.
170
Labour turnover and workforce stability
toolbox for illustrating to departmental managers that this is not something just to accept and at which
to shrug their supervisory shoulders (the negative turnover culture reaction). Major costs can be assessed
and analysed as some examples below indicate:
• the costs associated with termination of employment such as HR administration, payroll administration,
exir interviewing
• costs associated with replacement, including direct costs such as advertising, recruitment, selection
processes which involve application assessment, shortlisting of candidates, selection interviews and
possibly psychometric testing costs, online applications and assessment costs, agency commission
perhaps, possibly travel expenses
• costs associated with transition, direct and indirect costs such as relief cover and overtime payments,
training costs, low productivity during training, possible wastage, more time invested in induction
and orientation activities
• costs of an indirect nature, such as HR, line management and supervisory time dedicated to
recruitment, selection and induction/training activities
• and the potential loss in customer satisfaction and repeat business and therefore loss of sales and
profitability.
171
The employment relationship
Turnover
Culture
Turnover
Intention
Symbolic and
SERVICE substantive
ENCOUNTER
COMPLEXITY consumption of
customer
overall well-being of the organization with special reference to the underlying state of employee relations
within the business, a topic which will be considered in the following chapter. However, labour turnover
is a hugely complex phenomenon, and its full understanding remains a constant preoccupation of
hospitality practitioners and researchers alike. To aid this challenge, it is increasingly seen as important
to analyse the issue in terms of the specifics of a particular job and individual, but also at the far broader
scale of the overall organizational culrure and its reliance on a stable workforce.
Bellou, V. (2009) 'Matching individuals and organizations: evidence from Greece', Employee Relations,
31(5): 455-470.
Bolton, S. C. and Houlihan, M. (2009) 'Are we having fun yet? A consideration of workplace fun and
employment', Employee Relations, 31(6): 556-568.
Davidson, M., Timo, N. and Wang, Y. (2010) 'How much does labour turnover cost?', International
Journal of Contemporary Hospitality Management, 22(4): 451-466.
Deery, M. A. and Shaw, R. N. (1997) 'An exploratory analysis of turnover culture in the hotel industry
in Australia', International Journal of Hospitality Management, 16(4): 375-392.
Deery, M. A. and Shaw, R. N. (1999) 'An investigation of the relationship between employee turnover
and organizational culture', Journal of Hospitality and Tourism Research, 23(4): 387-400.
Douglas, M. (1978) Cultural Bias, Occasional Paper No. 34, Royal Anthropological Institute of Great
Britain and Ireland.
Goss-Turner, S. (2010) 'The relationship between organisational culture and labour turnover', unpublished
PhD thesis, University of Brighton.
Hochschild, A. R. (1983) The Managed Heart: The Commercialization of Human Feeling, Berkeley:
University of California Press.
172
Labour turnover and workforce stability
Hom, P. W. and Griffeth, R. W. (1995) Employee Turnover, Cincinnati, OH: South Western
Publishing.
Kelliher, C. and Perrett, G. (2001) 'Business strategy and approaches to HRM - a case study of new
developments in the United Kingdom restaurant industry', Personnel Review, 30(4): 421--437.
Korczynski, M. (2002) Human Resource Management in Service Work, Basingstoke: Palgrave
Macmillan.
Korczynski, M. (2003) 'Communities of coping: collective emotional labour in service work',
Organization, 10(1): 55-79.
Kuvaas, B. (2007) 'An exploration of how the employee-organization relationship affects the linkage
between perception of developmental human resource practices and employee outcomes', Journal of
Management Studies, 45(1): 1-25.
Lashley, C. (1999) 'Up against the wall: the cost of staff turnover in licensed retailing', The Hospitality
Review, October: 53-56.
Lashley, C. and Best, W. (2002) 'Employee induction in licensed retail organisations', International
Journal of Contemporary Hospitality Management, 14(1): 6-13.
Lashley, C. and Rowson, B. (2000) 'Wasted millions: staff turnover in licensed retailing', Proceedings of
9th Annual Research Conference of the Council for Hospitality Managemem Educators, University of
Huddersfield.
Lucas, R. (2004) Employment Relations in the Hospitality and Tourism Industries, London: Routledge.
Lynn, M. (2002) 'Turnover's relationships with sales, tips and service across restaurants in a chain',
International Journal of Hospitality Management, 21(4): 443--447.
Mann, S. (1997) 'Emotional labour in organisations', Leadership and Organisation Development
Journal, 18(1): 4-12.
Mann, S. (2007) 'Expectations of emotional display in the workplace', Leadership and Organisation
Development Journal, 28(6): 552-570.
Meyer, J. P., Stanley, D., Herscovitch, L. and Topolnytsky, L. (2002) 'Affective, continuance
and normative commitment to the organization: a meta-analysis of antecedents, correlates and
consequences', Journal of Vocational Behaviour, 61: 20-52.
Morrell, K., Loan-Clarke, J. and Wilkinson, A. (2001) 'Unweaving leaving: the use of models
in the management of employee turnover', International Journal of Management Reviews, 3(1):
219-244.
Morrell, K., Loan-Clarke, J. and Wilkinson, A. (2004) 'The role of shocks in employee turnover',
British Journal of Management, 15: 335-349.
Nickson, D. (2007) Human Resource Management for the Hospitality and Tourism ltldustries, Oxford:
Butterworth -Hei nema nn.
Noon, M. and Blyton, P. (2007) The Realities of Work, 3rd edn, Basingstoke: Palgrave Macmillan.
People 1st (2011) State of the Nation Report 2011, Analysis of labour market trends, skills, education
and training within the UK hospitality, leisure, travel and tourism industries, London: People 1st.
Pratten, J. D. and Curtis, S. (2002) 'Attitudes towards training in UK licensed retail: an exploratory case
study', International Journal of Hospitality Management, 21(4): 393--403.
Riley, M., Lockwood, A., Powell-Perry, J. and Baker, M. (1998) 'Job satisfaction, organisation commit-
ment and occupational culture: a case from the UK pub industry', Progress in Tourism and Hospitality
Research, 4: 159-168.
Rowley, G. and Purcell, K. (2001) 'As cooks go, she went: is labour churn inevitable?', Imernational
Journal of Hospitality Management, 20: 163-185.
Seymour, D. and Sandiford, P. (2005) 'Learning emotion rules in service organizations: socialization and
training in the UK public house sector', Work, Employment & Society, 19(3): 547-564.
Shore, L. M., Tetrick, L. E., Lynch, P. and Barksdale, K. (2006) 'Social and economic exchange:
construct development and validation', Journal of Applied Social Psychology, 36: 837-867.
173
The employment relationship
Yang, J-T. (2008) 'Effect of newcomer socialisation on organisational commitment, job satisfaction, and
turnover intention in the hotel industry', The Service Industries Journal, 28(4): 429-443.
Members of the UK's Institute of Hospitality (IoH) can access publications including Management
Guides which summarize key information of relevance to hospitality operations
(www .instituteofhospitali ty.org).
Members of the UK's Chartered Institute of Personnel and Development (CIPD) can access a range of
materials including Fact Sheets and articles from over 300 online journal titles relevant to HRM. CIPD
members and People Management subscribers can see articles on the People Management website
(www.peoplemanagement.co.uk).
What are some of the connections between labour turnover and organizational
culture?
3 What external factors affect labour turnover and how may they be limited?
4 What means are available to managers to analyse the issues and address the
problem of unacceptably high labour turnover levels?
174
Employee relations
In many respects this whole book is concerned with the relationship between employers and their
employees. Whether one is considering recruitment, induction, grievance and disciplinary procedures
or reward systems, all have important inputs into the employment relationship. However, all of these
can be concerned with the relationship of an individual employee and the employer, a situation of a
manager directly managing an individual employee.
This chapter, instead, is to focus on the collective relationship traditionally referred to as 'industrial
relations' but which, with the changed nature of trade union roles and power, is increasingly referred to as
'employee relations' (Bacon, 2006). At one extreme, such relationships are seen as being concerned with
purely economic issues, i.e. the 'pay for effort' bargain or relationship. At another extreme are those who see
industrial relations as being concerned with politics and as an extension of party politics. The term 'employee
relations' isgenerally used to describe the relationship that exists between the management of an undertaking
and its work people predominantly through their representatives, in the collective sense. An important
contributor to the subject of employment relations as it pertains to the hospitality industry is Rosemary
Lucas, whose definition of the employment relationship also introduced the consumer within its scope:
Employee relations in hotels and catering is about the management of employment and
work relationships between managers and workers and, sometimes, customers, it also covers
contemporary employment and work practices.
(Lucas, 1995: 81)
In a later work, Lucas (2004) develops this important theme for service industries, where the role and
behaviours of hospitality employees are impacted upon crucially by the organization, its culture, its manage-
ment and the customer they are serving. The challenge for many hospitality employees is to satisfy the needs
and demands of all these stakeholders, and this complexity of relationship can create significant problems
for individual workers through the role conflict and potential stress that can result. The hotel receptionist
dealing with a stressed guest, disappointed and angry about the poor decorative order of a hotel bedroom, is
in a patlous position, faced with the 'power' of the customer, and the 'power' of the organization and
management that demands maximum occupancy and revenue from all rooms, including the substandard
accommodation not yet featuring on the carefully budgeted and phased refurbishment schedule.
Bacon (2006: 188) points to the frames of reference, the underlying assumptions of managers towards
their workforce as a critical element within employee relations, impacting on the managers' behaviour
and management style. A unitarist approach seeks harmony and collaboration, believing the workforce
to be all members of the same team; a pluralist perspective sees an organization as composed of different
175
The employment relationship
subgroups and subcultures, all needing a clearly defined structure and framework to work within;
the radical frame of reference sees a power struggle between groups of unequal power as exemplified by
the power of the owners and managers of the enterprise and their less powerful employees.
The traditional and collective term of industrial relations is sometimes still applied in employment
situations where employees are organized and represented within a strong trade union. In the hospitality
industry the degree of organization of employees within trade unions varies considerably. At one end of
the scale, in sectors such as public sector and contract catering, it is possible for all employees' conditions
of employment to be determined by negotiation (collective bargaining) and national agreements result-
ing in a high degree of union membership; yet at the other end of the scale, in most private enterprise
hotels and restaurants, trade union membership is comparatively low, and often non-existent. Upon
close examination it appears that there are certain factors that either contribute towards or militate
against strong union involvement. Bain and Price (1983) identified a number of determinants of union
growth or decline, factors still relevant today. These include:
• industrial structure
• government action
• business cycle
• composition of potential membership
• employer policies
• personal and job-related characteristics
• union leadership.
Using some of these determinants identified by Bain and Price (1983), supported by the later work of
Noon and Blyton (2007), it is possible to conclude that union membership is extremely low and sporadic
in the hospitality industry, and service sector work in general, for the following reasons:
• The very large number of small establishments, often managed by the proprietor of the business,
which makes it difficult for trade union officials to approach individuals and canvass potential
members and to organize meetings.
• The highly dispersed and departmentalized labour force, even in the largest establishments, result-
ing in the absence of cohesive groups of workers with common interests and common issues.
• The large number of part-time employees, predominantly female and also many young employees,
all people who are rarely interested in belonging to a trade union and paying any membership fees.
• The large number of transient employees and 'tourist workers', employees who are in hospitality
industry employment for relatively short periods of time and cannot envisage their conditions being
affected.
• Shift working, which again makes it difficult to contact potential members directly and organize
employees.
• Tipping, which introduces an entrepreneurial (perhaps selfish) element into hospitality work; many
employees fear a rrade union would try to eliminate, or try to distribute in a more collective manner,
rather than a tip being an extra reward for giving good customer service as an individual.
• Individual and unwritten cash payments/contracts made between the employer and the employee.
• No history and tradition of trade union membership within some sectors of the industry, unlike
manufacturing industry; indeed, many hospitality employees appear to 'side' with their employers
in a scenario of paternal benevolence rather than be seen to be at the behest of left-wing unionists.
• Employers' resistance, because employers fear that they have more to lose than to gain from the
trade union movement, and feel that the involvement of unions will only cause friction and
potentially damage their perceived close relationships with their employees.
• High labour turnover in some hospitality sectors mitigates against membership, association and the
ability of trade unions to organize effectively.
176
Employee relations
Figure 15.1 illustrates how these factors can be applied to the hospitality industry and lead to low or high
union membership.
177
The employment relationship
behalf. Thus trade unions were freed of any risk of a civil liability arising from their actions. A variety of
other legislation followed which repealed certain preceding legislation, covered the amalgamation of
trade unions and tied up some other aspects that were not satisfactory.
However, the most notable legislation to date was the Industrial Relations Act of 1971, which replaced
most preceding legislation regarding trade unions and followed both the main political parties' examina-
tion of the increasingly complex and potentially disruptive industrial relations scene. This Act granted to an
individual the right to belong or not to belong to a trade union. This was subsequently repealed with many
other provisions by the Trade Unions and Labour Relations Act 1974. Certain provisions particularly
relating to 'unfair dismissal' remained to protect the individual, but have since been altered by subsequent
employment legislation. Principal statutes enacted concerning employment rights and trade unions rights
in the intervening period have been the Trade Union and Labour Relations (Consolidation) Act 1992, the
Trade Union Reform and Employment Rights Act 1993 and the Employment Relations Act 1999.
The trade union movement, along with other elements of our society, has undergone a period of
consolidation, merger and rationalization. At the end of 1972 there were about 480 trade unions, whose
members totalled about 11 million; in 1987 there were only 373 unions with 10.7 million members; in
1989 there were about 8.6 million members in unions affiliated to the Trades Union Congress (rue).
The number of union members was the same in 1993 (8.6 million) but the number of certificated unions
had fallen to 267, of which 67 were affiliated to the rue. Brown (2000) reports that the number of UK
workers with trade union membership decreased from 53 per cent of the total workforce in 1979 to just
28 per cent in 1999. Brownlie (2012) reports that in 2011, trade union membership stood at 6.4 million
or just under 25 per cent of the working population of the UK. Recent trends seem to suggest that
membership has begun to rise slightly in the public sector, as people worry more about their terms and
conditions, especially pension rights, in a period of economic austerity imposed by the Coalition
Government since 2010.
Other statistics in the Department for Business, Innovation and Skills (BIS) report on trade union
membership in 2011 (Brownlie, 2012) reveal further reasons why membership density within the
hospitality industry remains low. Of the 6.4 million members of trade unions in 2011, 80 per cent
were full-time workers, whereas only 20 per cent were part-time workers, a dominant group in
hospitality. It also notes that 43 per cent of members are aged between 35 and 49 years, whereas only
4.6 per cent of members are aged between 16 and 24, an age group of significance within hospitality. The
hospitality sector, as analysed by the Workplace Employee Relations Survey in 1998, had no members at
all in 92 per cent of establishments. Recent estimates of the percentage of the hospitality labour force
who are members put the figure at as low as 4 per cent (Brook, 2002, cited in Lucas, 2004). The BIS
report puts the accommodation and food service sector as the lowest density of trade union membership
in the UK of all industry classifications, at just under 4 per cent (Brownlie, 2012).
178
Employee relations
The 1980s experienced further industrial unrest but also a UK government committed to deregulation
of the labour market and the gradual dismantling of the voluntary collective bargaining processes and
institutions (Lucas, 2004). The impact of these changes on the development of people management
practices was significant. Personnel Managers, now often retitled Human Resources Managers, had to
reappraise their role in a new-style workplace and service-dominated economy. They were more
concerned with the corporate strategy of the business and with employee relations (rather than industrial
relations) in a post-industrialization society (Millward, 1994). Bacon (2006) suggests that the main aim
of HRM in this new era of employee relations was to steer a complementary course, aligning both
individual and collective approaches, but, it is argued here, within a context of HR being firmly placed
within the management of the business and not a somewhat parlous go-between.
179
The employment relationship
establishment meet head office management. This system is most appropriate where a company is
heavily represented in an area - London, for example - and where management might wish to
discourage unnecessary movements between units caused by varying supervisory or personnel practices
within the company's establishments. On the other hand it may not be necessary where an employer's
establishments are located far apart in areas where conditions are very different.
Large organizations, with no collective agreement with trade unions, also try to utilize staff hand-
books and other information materials to convey to staff the key issues in the relations between
employees and employer. Such handbooks can serve two purposes: to give information to the employee
and also to encourage discussion and involvement with the management of the outlet to ensure
good employee relations. Frequently such handbooks will cover the practical implications of terms
and conditions of employment such as pension schemes, in-company discounts, bank holiday work and
possibly share-save schemes. Other employee relations aspects covered might be the firm's equal
opportunities policy, a statement about bullying and harassment, and smoking at work regulations.
Establishing consultation
Once the decision has been taken to establish a consultation protocol within an organization, the scope
of the ensuing discussions may cover all matters of interest to both sides, including the overall reward
system, hours of work, working methods and company plans. It should be clear, however, that the
purpose of such consultative committees is consultation and not ongoing, endless negotiation. Setting up
a staff consultative committee sometimes presents problems, because it is essential that the employees'
representatives are chosen, perhaps even elected, by their colleagues and not by management. The
outline of a constitution and rules for a staff consultative committee, taken from a multi-unit hotel
company, is illustrated in Figure 15.2.
180
Employee relations
1 Objectives
The object of the Staff Consultative Committee is to provide a means of communication and consultation between the
management and staff of the hotel on all matters of mutual interest, including:
(a) Explanation on general information concerning company activities, policies and procedures.
(b) Business plans for the hotel and current results, expressed in broad terms as percentages, etc.
(c) Ideas for improving sales, standards of performance, efficiency and productivity.
(d) Discussion on staff rules and regulations, and discussion on security matters.
(e) Terms and conditions of employment, staff amenities and welfare facilities. Wage rates/wage reviews may be
discussed in general terms only. The wages or status of an individual member of staff may not be discussed.
(f) Training activities.
(g) Health and safety at work, including hygiene and welfare. (The hotel Safety and Hygiene Officer should be in
attendance during discussion on these items.)
(h) Organizing of social, sporting and recreational activities.
2 Membership
The Committee shall consist of:
3 Attendance
Any member who is absent without adequate reason for two or more consecutive meetings may, at the discretion
of the Committee, be disqualified from membership.
4 Co-option
The Chairman may invite additional members of management and/or staff to attend meetings to provide special
information.
6 Officers
The officers shall consist of the Chairman, a Management Representative and Head of Human Resources
Representative as referred to in Paragraph 2 (a), (b) & (c).
7 Retirement
Staff Representatives shall be elected for one year and may be eligible for re-election every year.
Management members shall hold office at the discretion of their superiors.
181
The employment relationship
8 Meetings
(a) Ordinary meetings shall be held at least every two months during normal working hours if possible, and 14 days'
notice of the meeting should be given. Items for the agenda may be submitted to any member of the Committee
and the agenda should be distributed to members with a copy placed on the staff noticeboard at least 7 days
before the meeting. Fixed Items on the agenda should be:
(b) Special meetings may be convened at the request of any four members or the Chairman.
(c) The meetings shall conform to committee procedure, members addressing the Chair.
(d) Discussion shall be opened by the members in whose name the item on the agenda stands.
9 Minutes
The Chairman shall ensure that accurate Minutes of all meetings are kept which summarize the discussion and define
clearly the action being taken and who is responsible for that action. (Minutes must always have an Action column.)
The Minutes must be prepared and circulated within 7 days of the meeting with copies distributed to all Committee
members, all Management and Heads of Department and all Staff Noticeboards. Copies of the Minutes are also to be
sent to the Area Operations Director, the Hotels Human Resources Department and the Group Human Resources
Director.
10 Alterations of Rules
Additions or amendment to these rules may only be made by the Committee, with the approval of the Company.
In concluding this chapter, it must be stressed that the approach of managers towards the subject of
positive employee relations will vary greatly across the enormous diversity of business within hospitality.
However, it is noteworthy that the lack of formal trade union representation and evidence of 'tradi-
tional' collective industrial relations is not an excuse for ignoring this critical aspect of managing people
and promoting a contemporary approach to HRM. The hospitality workforce is itself diverse and
composed of so many different skills and experience levels, and these very facts demand that manage-
ment teams talk and listen to staff in a meaningful way, confident that if staff feel involved and engaged,
they are more likely to achieve the levels of commitment and performance that will supply the business
with its commercial prosperity.
Armstrong, M. (2012) A Handbook of Human Resource Management Practice, 12th edn, London:
Kogan Page.
Bacon, N. (2006) 'Industrial relations', in Redman, T. and Wilkinson, A. (eds) Contemporary Human
Resource Management, 2nd edn, London: Prentice Hall.
Bain, G. and Price, R. (1983) Industrial Relations in Britain, London: Blackwell.
Brook, K. (2002) 'Trade union membership: an analysis of data from the autumn 2001 LFS', Labour
Market Trends, July: 343-356.
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Employee relations
Brown, W. (2000) 'Putting partnership into practice in Britain', British Journal of Industrial Relations,
38(2): 299-316.
Brownlie, N. (2012) Trade Union Membership 2011, report for the Department of Business, Innovation
and Skills, London: National Statistics Publication.
Farnham, D. and Pimlott, J. (1995) Understanding Industrial Relations, 5th edn, London: Cassell.
Knights, D. and Kerfoot, H. (2012) (eds) Introducing Organizational Behaviour and Management,
2nd edn, Andover: Cengage Learning EMEA.
Lucas, R. (1995) Managing Employee Relations in the Hotel and Catering Industry, London: Cassell.
Lucas, R. (2004) Employment Relations in the Hospitality and Tourism Industries, London: Routledge.
Mabey, C. and Salaman, G. (1995) Strategic Human Resource Management, Oxford: Blackwell.
Millward, N. (1994) The New Industrial Relations, London: Policy Studies Institute.
Noon, M. and Blyton, P. (2007) The Realities of Work, 3rd edn, Basingstoke: Palgrave Macmillan.
Sisson, K. and Storey, J. (1993) Managing Human Resources and Industrial Relations, Milton Keynes:
Open University Press.
Storey, J. (2007) Human Resource Management - A Critical Text, 3rd edn, London: Thomson.
Torrington, D., Hall, L. and Taylor, S. (2008) Human Resource Management, 7th edn, Harlow:
Pearson Education.
Members of the UK's Institute of Hospitality (IoH) can access publications including Management
Guides which summarize key information of relevance to hospitality operations
(www. insti tuteofhospi tal ity .org).
Members of the UK's Chartered Institute of Personnel and Development (CIPD) can access a range of
materials including Fact Sheets and articles from over 300 online journal titles relevant to HRM. CIPD
members and People Management subscribers can see articles on the People Management website
(www.peoplemanagement.co.uk).
3 Discuss the external factors that influence the nature of employee relations.
5 Evaluate the approach to employee relations used by an employer you know well.
183
Employment law
Employment legislation is one of the more complex areas of law affecting employers so this chapter needs
to be viewed as a very brief overview intended to illustrate its scope rather than its detail, particularly as
such legislation is subject to constant change. Major areas of employment law have been selected and
summarized below. Before looking at these, however, it is important to define an 'employee'.
Under section 230 of the Employment Rights Act 1996, the word 'employee' is defined to mean
somebody with a 'contract of employment'. This means someone who has a 'contract of service' and not
a 'contract for services', which distinguishes between someone who is working for another, under their
control, and someone who is working on their own account, controlling their own work. In other words,
it is meant to be the difference between the truly 'employed' and the 'self-employed'. This has implica-
tions for issues such as tax and national insurance. Similar definitions will exist in many other jurisdic-
tions. There are advantages to employers to employ 'contractors' or subcontractors because these have
no employment rights such as sickness and pension rights and no additional charges.
The aim of this chapter is not to describe in detail legislation relating to employment. Instead the
chapter sets out to identify the general scope of employment law which is subject to national political,
economic, social and technological development. As a consequence employment law changes very
regularly over time. The evolution and development of modern, complex societies have been accom-
panied by the need to regulate many of the activities of various groups of people. In the case of
employment in England and Wales, the activities of employers were long regulated by various legal
institutions such as magistrates, who had, among a number of powers, the power to set rates of pay.
Craft guilds also played a significant role throughout much of Europe. The guilds set duties and
conditions for apprentices and their masters. A master craftsman was entitled to employ young people
in exchange for providing food, lodging and formal training in the craft.
From the nineteenth century onwards, the activities of employers became subject to increasing
regulation in order to provide employees with greater protection in economic, social and physical
terms. In England early legislation was the Factories Act 1833. The basic Act legislated:
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Employment law
At the geo-politicallevel various international conventions set out to protect employees from exploita-
tion such as the International Labour Organization's (ILO) Convention on Human Rights. The ILO was
created in 1919 in order to protect against injustice, hardship and privation. The ILO now has 174
member states which are committed to:
Before employment
Sex, race, age discrimination - e.g. advertising and interviewing
Rehabilitation of offenders - certain offenders do not have to reveal spent convictions
Employing overseas workers - work permits needed in certain cases
Employing children - local authority approval needed
Employing young persons - e.g. licensing law restrictions
Employment agencies - who is the employer? who pays the agency?
Disabled workers - physical impediments or obstacles to their employment to be removed
Trade union membership - free to belong or not to belong
On starting employment
Contract of empioyment - certain terms and conditions to be given in writing
Health and safety - e.g. induction, fire training, safety precautions
Employer's liability insurance - needed to indemnify employees in case of accidents at work
During employment
Maximum hours
Statutory paid holidays
Health and safety at work - range of health and safety measures
Disciplinary procedures - need to be communicated and fair
TIme off - for sickness, matemity, jury service, etc.
Trade union membership - free to belong or not to belong
Harassment - employer to take reasonable measures to prevent harassment
Discrimination - e.g. in promotion
Discipline and grievance procedures
Termination
Termination procedures - resignations and dismissals
Written reasons for dismissal
Transfer of undertakings - protection of employment.
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The employment relationship
Examples of such legislation include the introduction or extension of legislation into the United
Kingdom covering minimum wages, maximum working hours and statutory paid holidays.
Due diligence
Employers are expected to take reasonable precautions to ensure the safety of the customers, staff and
others coming onto their premises. The owner or the manager or responsible employee should take all
reasonable precautions and exercise all due diligence to avoid committing an offence. One example of
exercising 'due diligence' would be the use of Hazard Analysis and Critical Control Points (HACCP) to
ensure food safety. Another would be the proper training of bar staff to ensure that under-age people are
not served alcohol. Again, this legal concept exists in very many jurisdictions.
Contracts of employment
A contract of employment is the basis of the working relationship between employer and employee
and is subject to the general principles covered by the law of contract. In common law countries there
are a number of essentials for a contract to be valid. These are as follows:
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Employment law
In most common law countries a contract of employment may be oral, written, or the terms may be merely
implied. It consists of an offer by one of the parties and an acceptance by the other. The consideration must
have an economic value. The offer is usually (but not necessarily) made by the employer and should
contain details of remuneration, hours, location and holidays. The offer may refer to other documents such
as pension scheme booklets. Not all conditions have to be included, as some may be implied by custom and
practice. The contract comes into existence when the offeror receives acceptance from the offeree.
Although, in common law, many contracts need not be in writing, it is advisable, in the case of
employment contracts that all offers and acceptances are in writing in order to avoid misunderstanding
and possible problems. Furthermore, because employers are obliged to issue a written statement of the
main conditions of employment (see below), there is no real reason today for not preparing a proper,
written contract of employment.
In civil law countries, as noted above, employment contracts may be largely regulated by codes
leaving less room for negotiation.
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The employment relationship
Discrimination in employment
Discrimination against applicants for jobs and those in employment can be directed at a range of
different groups of people including women, men, people of some ethnic groups, people with certain
beliefs or with disabiliry, people of gay, lesbian or bisexual orientation, people with criminal convictions
and older people. The UK legislation, largely repeated in European Union legislation and many other
jurisdicrions (e.g. USA, Canada, Australia) is directed at eliminating discrimination in the workplace
which is aimed at women, ethnic minorities, people with disabiliry and those who may be discriminated
against because of their religion or beliefs.
Under UK legislation, the Equaliry Act 2010 identifies a range of discriminations:
Direct discrimination
This consists of acts that discriminate against another on grounds such as gender, racial origin or
disabiliry. To refuse to employ someone on the grounds that they may be too old would be an example
of direct discrimination. This legislation presents problems for employers in some situations. For
example, a bar operator might prefer to employ attractive young women. Associative discrimination
arises when someone is treated less favourably because he or she might be connected to someone who
might present problems, such as having a disabled partner. Perceptive discrimination occurs when
someone is discriminated against because they might be perceived to present problems such as a
woman who might be about to start a family, or someone whose religious beliefs could interfere with
their abiliry to do certain tasks (e.g. a strict Muslim cannot consume or serve alcohol).
Indirect discrimination
This consists of applying conditions that make it more difficult for certain people, for example, of one
sex or of a particular racial group, to fulfil them. An example would be specifying a condition such as to
be able to lift heavy weights, without this being a necessary task; the result would be to exclude most
women.
Harassment is defined as 'unwanted conduct ... which has the purpose or effect of violating an
individual's digniry or creating an intimidating, hostile, degrading, humiliating or offensive environment
for that individual'. Sexual and racial harassment are examples.
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Employment law
This Act provides the rights of employees, who work over a certain number of hours, to minimum
periods of notice dependent on their length of service, and the Act also requires that employees are given
written details of certain conditions of employment, known as the 'written statement of particulars'. It
confirms the main express terms of the employment contract. Whilst not definitive of the entire contract,
the written statement is intended to be a guide for employees of their rights.
Where a contract provides for longer periods of notice the terms of the contract will apply, whereas
contracts containing shorter periods are overridden by the periods laid down by the 1996 Act. Payment
in lieu of notice may be made by the employer or the employee.
Written particulars
These must be given to people within two months of employment commencing. This does not apply to
casual workers whose contract is for one session of work at a time.
Written statements need not take any particular form but the contents are prescribed and they can refer
employees to other documents such as manuals and booklets, which must be reasonably available to them.
There is no requirement in law for the employee or the employer to sign the statement. But it is advisable to
issue all employees with a statement and to retain signed copies in the personal dossiers. The ideal
procedure is to design letters of offer so that they satisfy the Employment Rights Act 1996 requirements.
Restraint on employees
In the case of some employees, such as chefs, sales staff or managers, employers feel it necessary to include a
clause in a contract which restrains an employee from divulging trade secrets, entering into direct
competition by operating his or her own business, working for another person in the same line of business
or using lists of customers prepared in the course of employment in order to entice customers away.
To obtain protection against such eventualities any terms in a contract need to be clearly stated and
not implied. It is important, however, to make such a term reasonable in the circumstances, otherwise the
right to any protection could be forfeited. At the same time such restraint clauses must be shown to be in
the public interest and it is unlikely that such a restraint clause will be upheld.
Searching employees
It is always advisable to obtain an employee's permission before attempting to search his or her person or
property. To search a person without permission, and without finding evidence of theft, can result in the
189
The employment relationship
employer being sued for assaulr and battery. In those cases where the employer's right to search
is considered to be vital, a clause to this effect should be written into every person's contract
of employment. Even so, an employee cannot be forcibly searched if he or she refuses. Such a refusal
instead becomes the subject of disciplinary or dismissal proceedings for breach of a condition of
employment.
Dismissals
Under the Employment Rights Act 1996 there is protection for employees against unfair dismissal.
Similar rights exist in many other jurisdictions where dismissal can be much more difficult and expensive
than in the UK. Valid reasons for dismissal may include:
• lack of capability or qualification for the job for which an employee was employed
• misconduct (e.g. theft, rudeness)
• redundancy, within the definition of redundancy legislation (e.g. no further need for a job to be
performed)
• unsuitability due to legal restrictions (e.g. loss of alcohol licence, driving licence where driving is
part of the duties)
• some other substantial reasons (e.g. chronic sickness).
In most states of the United States similar concepts apply under their 'just cause' principles. However
certain US states have the 'at will' concept under which employment can be terminated, by either party,
at any time, irrespective of length of service.
The argument underlying instant dismissal is thar the employee, through serious misconduct, has
repudiated the contract, and the employer chooses not to renew it.
An employer can normally only dismiss an employee for misconduct committed outside working
hours and away from the place of work if other employees were involved, or which could have an effect
on the employer's business, or if the employee is in domestic service.
Where an employer dismisses a person instantly it should be done at the time of the misdemeanour or
when it first comes to the attention of the employer. To delay may imply that the employer has waived his
or her right to dismiss, but see the discussion of suspensions below. The reason for dismissal should be
given at the time of the dismissal.
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Employment law
An employer may, in some cases, withhold money earned by an employee who has been instantly
dismissed for good reasons, unless a contract states otherwise. However, legal advice should always be
sought before taking such action.
Suspensions
In some circumstances, particularly involving alleged misconduct, an employer may wish to suspend an
employee until the circumstances have been looked into and a decision has been taken regarding the
employee's future. It is quite in order to do this so long as pay is not withheld - unless a contract
specifically permitting the withholding of pay is in existence.
Payment of wages
As wages or salaries are central to the employment contract there is extensive legislation concerned
with this subject. One of the key issues is minimum wage legislation. This is common in many but not all
countries. Where there are powerful trade unions and where collective bargaining works effectively,
such as in Germany, minimum wage legislation does not exist. In many other countries minimum wage
legislation does exist, ranging through much of Europe including the UK and France. Minimum wages
also exist in the USA, Australia and Canada. In many cases minimum wages are modified for catering
workers because of their tips or service charge earnings, as well as meals and accommodation.
Generally speaking, arrangements for the payment of wages are regulated by the contract of
employment. In the UK the Employment Rights Act 1996 provides specific rules on deductions. These
specify that an employer must not make deductions or receive payment (e.g. as a fine) unless
• the deduction is authorized by statute, e.g. national insurance, income tax, court order
• the deduction is authorized in the contract of employment
• the worker has agreed in writing to the deduction.
Certain deductions are exempted from the above conditions, such as the recovery of an overpayment of
wages.
In the case of the retail trade, including hospitality, cash and stock shortages are relatively common.
During a busy work session mistakes can be made and some employers hold the staff responsible. In such
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The employment relationship
cases employees can be required, as a condition of the contract, to make good stock or cash shortages.
However, such a deduction or payment must not exceed 10 per cent of the gross pay due for the period.
On termination of employment, however, such deductions may exceed 10 per cent. They cannot
be made retrospective for more than 12 months. Notice of intention to make such deductions has to
be made in advance, and a written demand also has to be issued.
Social security
Social security schemes vary considerably from country to country. Most people over school-leaving age
and under pensionable age are obliged to contribute. Much of Europe has very supportive schemes, part
of the 'social model', providing a wide variety of benefits and welfare services such as benefits for
unemployment, sickness, industrial injuries and retirement. Some jurisdictions, in contrast, such as some
states of the USA and less developed nations, offer relatively little support.
Employer's liability
In common law countries there are two separate categories of liability that employers bear in relation to
injuries suffered by their employees while in their employment. These are common law and statutory
liabilities.
In common law, employers are expected to provide protection that is reasonable in the circumstances.
An employee will be compensated for injury if the employer was at fault in exposing the employee to
unnecessary risk in the circumstances. The common law responsibilities extend also to employees of
other employers, such as contractors, while working on the employer's premises, and also to the
employer's employees carrying out work for him or her on another person's premises, for example an
outdoor caterer's staff.
Common law, however, is not able to provide for all developments in industry and therefore statutes
exist to specify the nature of protection to be provided and to lay down certain other regulations
covering the working environment, the major one in the UK being the Health and Safety at Work Act
1974. This is largely replicated through much of the EU.
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Employment law
are simple to recognize - such as slips and trips, cuts and burns and food poisoning - through to less
obvious risks such as damage to hearing due to very high noise levels, e.g. in discos, or violence from
customers and other staff.
The Health and Safety at Work Act 1974, reflecting EU legislation, is largely implemented through a
number of different sets of regulations including:
The 1974 Act, in principle, obliges employers to ensure the safety of their employees and other people at
their premises, by maintaining safe plant, safe systems of work and safe premises, and also by ensuring
adequate instruction, training and supervision. This Act also covers such aspects as cleanliness, over-
crowding, lighting, temperature, ventilation and sanitary arrangements for work people. Other people,
too, such as designers, manufacturers, installers, importers and suppliers of goods for use at work, are to
ensure, in so far as they are responsible, that any health and safety risks are eliminated. Employees also
are responsible for the safety of others.
Risk assessment
From a management point of view probably the most important issue is that of risk assessment. 'Risk
assessment' is the term used to describe the process an employer uses to identify risks associated with a
business's day-to-day operations. If risk assessment is carried out effectively it will almost certainly
reduce the risk of injuty, but should an incident occur which leads to litigation it can be used to
demonstrate 'due diligence' (see above), a legal term used to demonstrate that an employer has taken
all reasonable steps to minimize risk.
Risks and the likelihood of occurrence may be classified as follows:
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The employment relationship
Multiplication of the two factors (severity and likelihood, resulting in a score of, for example, 2, 4, 9)
indicates the overall degree of risk.
Employment of children
The legal definition of a child varies from country to country, the determining criterion being age which
ranges from around 14 to 18. The International Labour Organization has within its charter the
Elimination of Child Labour, as one of its major aims.
In the UK 'children' are defined as being under the minimum school-leaving age. The principal
Acts are concerned primarily with protecting the physical well-being of children and with specifying
the hours that they are permitted to work. Children, for example, are not permitted to work during
school hours and where a child is under 13 years of age the legal restrictions are particularly strict, for
example, limiting their hours of work to no more than one hour per day outside of school hours.
Restrictions on the working hours of young persons who have left school but are under the age of 18 are
also included in the Working Time Regulations 1998.
Employment of children and young persons in the hospitality industry, where alcohol is sold, is
covered by the Licensing Act 2003.
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Employment law
Picketing
Picketing is only lawful if carried out as part of a trade dispute and should be at or near the place of work.
Concluding statement
As stated at the start of this chapter, employment is an extremely complex area of law so this chapter
must be viewed as a simple introduction to some of the key issues.
Members of the UK's Institute of Hospitality can access publications including Management Guides which
summarize key information of relevance to hospitality operations (www.instituteofhospitality.org).
Members of the UK's Chartered Institute of Personnel and Development (CIPD) can access a range of
materials including Fact Sheets and articles from over 300 online journal titles relevant to HR. CIPD
members and People Management subscribers can see articles on the People Management website
(www.peoplemanagement.co.uk).
195
Human resource planning and
information systems
196
HR planning and information systems
and practices in different locations, different countries with very different local factors, traditions and
employment environments. Hotel companies such as Intercontinental have recently announced major
international expansion plans in countries like China and Russia, two of the so-called 'BRIC' nations
(supplemented by Brazil and India), where rapid economic growth is providing enormous future
opportunities for international hospitality businesses.
Such developments lead to a need for more accurate planning so that an employer has the
appropriate quantity and quality of human resources available when required, from managers to
front-line service workers. HR plans are essential to ensure that labour costs associated with growth
and development are soundly considered, not unnecessarily overly burdensome on an expanding
business. Because of this, well-conceived human resource policies and plans are now playing an
increasingly important part in furthering many companies' wider business objectives. HR plans need
to be an integrated element of the overall business or corporate plan, not an adjunct or afterthought,
and need to be recognized by all senior management as a critical part of ensuring future competitive-
ness and profitability. The strategic HR plans will then be cascaded into more detailed, operational
HR plans that give meaning and guidance to all managers and employees in their everyday work. This
means the strategic plans related to all-embracing issues such as organizational culture and service
quality are ultimately enacted within the commitment and performance of the workforce in its
dealings with the customer.
Strategic HR planning
Successful human resource policies can only be achieved through a thorough understanding of the
organization, its objectives, its management, its operating style and its social, technical and political
environment. HR planning can therefore be described as the process of interpreting the employment
environment, predicting its effects on the organization, evaluating these effects and planning and
controlling appropriate measures in order that the company possesses an effective and efficient human
resource; basically the right people in the right place at the right time. In effect, HR strategists need to
compare the organization's existing workforce with the forecast demand created by the corporate plan,
and hence the planning and implementation of HR activities in order that the organization can recruit,
train and develop appropriate human resources. This process will often be placed within a scenario of
commercial success and development, planning the recruitment of more staff for a healthy, growing
organization. However, it may require there to be consideration of the less positive and comfortable
aspects of HRM, such as the restructuring of organizations, possibly the redeployment of reluctant
employees to other parts of the company or into alternative jobs, and, most regrettably, it may also
reveal the need for some redundancies.
In the main, however, human resource policies must be crafted in order to playa positive and creative
role in the plans, developments and future activities of an organization. They must be designed to
provide appropriately competent human resources as and when required. The need to plan on a sound
basis of reliable and pertinent information needs to be emphasized, and much of a manager's work
revolves around certain basic and fundamental information; for example, precise job or role descriptions
have been shown to be vital not only to recruitment but also to training, performance appraisal, job
evaluation and salary administration.
Human resource planning may be divided into two separate and distinct parts: strategic and opera-
tional. The strategic part of planning is concerned with ensuring that the right people will be available in
the longer term, for example for hotels and resorts that are not yet even purchased or built. Strategic
human resource planning for larger organizations requires a thorough understanding of the operation,
the sector and the wider economic and social environment. Figure 17.1 shows a 'systems thinking'
diagram - how an organization's plan and planning can be significantly affected by its environment.
197
Political Economic Technological
environment; Legsl environment; Geographic Social Demographic environment:
Cultural
stable-unstable, environment, Macro, e.g. environment, environment: environment: Inlemal:
environment;
cyclical,
e.g. economic e.g. expenditure population hi'-lech-lo' -tech,
attractions, values, e.g.
altitude to Stale investment, growth/recession, patterns, make-up hi'.touch-
services gender roles;
control and employment, balance of lifestyles. and trends, e.g. lo'-touch,
infrastructure. family
consumer payments, leisure, mallrfemale, product effect-
ownership, attitudes, e.g.
protection, exchange rale, climate, education young-old, process effect
centralized- authority,
food safely, unemployment transport unskiJled-skillecf External:
decentralized crime behaviour;
alcohol, level, systems Information,
locus of power e.g. alcohol,
discrimination, interest rates communications,
drugs, lime.
taxation Micro, e.g. transportation
keeping
access to systems
resources
I I
Size Structure
Policy
I I I
Values Culture Objectives
Resources
I I I I
Human Material Money Land
t
Products
t t t t
Outputs Profits! Employment Social Taxes
and costs costs
services
Strategic human resource planning seeks to align the corporate business plan and the HR plan, ensuring
as far as possible that the organization has an ability to respond to the HR needs of the corporate
plan, and hence the ability to adapt to market trends and customer needs, and maintain a competitive
advantage (Holbeche, 2001).
This is a particularly relevant approach for hospitality companies in an international expansion
setting as exemplified by the following (anonymized) case study:
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The employment relationship
With agreement on a substantial budget to underpin all this HR activity, the company
clearly signposted its strategic determination to bring the HR plan to full realization. Once
recruited, an HR executive was given the job of managing the progress of the new recruits
within the UK head office and specific hotel units. This entailed the development of a special
induction and orientation week, with a welcome from the chief executive and sessions with
senior managers from across the company's central departments and regional operations.
Each recruit was allocated a mentor from within the senior management team as well as a
more local mentor within their specific hotel. Further off-job training courses were planned
over an 18-month period, covering a range of management development activities and
topics. These courses were generally carried out in the Oakwood Hotels Management
College, an education and learning facility within the company, forming a wing of its
Hemel Hempstead hotel operation. There were also half-yearly formal appraisals of the
graduates and eventually they were interviewed and placed within hotels for their first
management position. The entire strategic plan and HR plan was eventually deemed to
have been a success in the main, although it was apparent that the acquisition of new
properties did not fully match the number of graduates prepared, leading to some of the
graduates leaving the company after training as they were dissatisfied with the positions
available within the UK.
Strategic HR planning can be seen from this example to be a link to strategy implementation and action, to
change and transformation, but also to financial planning and budgeting formulation - as this HR plan
shows, from recruitment across Europe to systematic and customized training incorporates significant
investment on behalf of the organization. This level of HR planning requires HR strategists to consider
the existing organizational culture, worker behaviours, skills and the management competencies of
the organization, and plan for those key aspects to change and adapt for the future business model.
HR planning also needs to be aware of the demographic profile of its labour market. This requires the
gathering of relevant data and statistics, from the locality of a single business to the impact of population
trends across a continent. In the case of European expansion as in the case study above, contemporary
plans for EU developments would not only need to consider the current economic issues within Europe,
but also the age profile of the labour market. Recent reports such as from the Office for National
Statistics (ONS), put the ageing population issue into a striking reality, predicting that by 2032, 23 per
cent of the UK population will be aged 65 or over, and that there will be 30 per cent more pensioners
than the proportion in 2011. In Europe (the 27 countries of the EU making a total population of about
500 million), it is forecast that 39 per cent of the population will be aged 65 or more by 2032. Life
expectancy rates continue to rise in the EU, the average age for men in 2011 in the EU was 76 and the
average age for women was over 82 years. These fundamental trends are significant for the hospitality
industry both in terms of implications for its customer base, but also its future workforce. HR planners
should also not be complacent about more contemporary issues, such as high youth unemployment in
Europe at the time of writing, as highlighted recently by a report from the Chartered Institute of
Personnel and Development (ClPD):
despite the continuing economic downturn, it is predicted that UK employers will need to fill an
estimated 13.5 million job vacancies in the next 10 years, but only 7 million young people will
leave school or college over this period.
(CIPD,2012)
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HR planning and information systems
Operational HR planning
From the broadest of issues at a strategic HR level, hospitality managers also need to translate and
interpret the wider HR policies and plans for the shorter term within an operational HR plan (see
Figure 17.2) that seeks to match the labour supply with the labour demand. Such a plan needs to
consider the more immediate issues of a plan for recruitment and selection (based on staffing ratios and
forecast business), for training and development, for performance monitoring and appraisal, for
succession planning and for associated plans for future compensation and benefits for employees.
Operational plans frequently require the planning and actioning of specific and customized initiatives.
Recruitment plans may lead to plans for advertising or agency consultation, or may be better setved by
local open days, a well-publicized invitation for local people to come along for a chat about potential
jobs and training within the organization. This is often used for new hotel and restaurant openings, and
may be preceded by specific advertisements and articles sponsored within the local press and on local
radio stations to raise awareness of the company's plans for local development and jobs. Plans for
selection methods may lead to the practical outcomes of the introduction of assessment centres and
psychometric testing of potential recruits, all designed to employ people most suited to the job and the
The enterprise
The workforce
induct
train
develop
motivate
divest
workers
Competing employers
Labour market
201
The employment relationship
organization and its culture, not just in the technical skills but also in attitudes and behaviours needed to
ensure customer service standards are achieved and competitiveness attained.
• to provide detailed operational information such as monthly establishment and payroll analyses
• to provide ratios or data such as wastage and turnover rates, age profiles and other demographic
characteristics
• to provide information on individuals for administration purposes such as salaries and pensions (all
within the limits and precepts of data protection legislation)
• to provide basic data for succession planning purposes and career development plans
• to provide statutory information such as national insurance, tax details, minimum wage records
and implications, working time regulations, statutory payments and redundancy payments if
appropriate
• to provide the basis for references and re-employment purposes
• to provide information for disciplinary, grievance procedures and possible future employment
litigation reasons.
The format and level of sophistication of the information system will very much depend on the size and
scale of the organization. Small, private firms may decide to keep paper records of such fundamental
aspects as: a personal file or personal dossier; pro formas connected with employment and appointment;
disciplinary, grievance and termination forms; establishment and labour turnover analyses; payroll data;
accident and medical reports; absentee records. However, with the benefit of modern computerized
202
HR planning and information systems
personnel information systems (CPIS), even small businesses can be reassured that for a relatively small
cost for a very basic system, they have an information base that both protects them from legal processes
and provides a basis for operational planning.
For hospitality organizations such as multi-site and multinational chains, with large and disparate
workforces, there is now a wide range of software systems that can be acquired. Some systems are
basic IT versions of the personnel record systems of the past, and can be purchased from as little as £300,
but for multinationals, much more sophisticated designs need to be considered, and the cost-benefit
factor assessed. Advanced CPIS provide stores of data, providing the necessary and essential information
required for both short-term, everyday management needs and also the basis for longer-term strategic
HR planning. Human resources software packages aim to provide the employer with all the necessary
data in one, secure location. A basic system can store:
• personal details
• holiday records
• absences/sick leave
• payroll records
• disciplinary records
• working patterns/shifts/rosters
• performance and training data
• legislative/statutory and required data.
With regard to this last point, these packages have the inherent advantage of giving the employer some
peace of mind over compliance with employment law and regulations. Regardless of size, an employer
is required by law to retain and maintain accurate basic details of employees of all levels and status,
from full-time to part-time and casuals, as well as details of other subcontractors and volunteers.
Systems will normally ensure there is adequate provision for systematic keeping of records connected
with legislation such as work permits, right-to-work forms and CRB (Criminal Records Bureau) and
ISA (Independent Safeguarding Authority) checks where relevant. They might have the facility to
generate written statements of employment for new employees within two months of their start dates
and also flag up renewal dates for important legal issues such as CRB checks where supervision of
children is involved.
Other, more sophisticated systems might include the following features:
• full HR software for personnel database management for comprehensive, safely stored employee
records
• payroll software with full integration of payroll with the HR information above, reporting needs and
statutory forms
• online recruitment facility with full vacancy management features from applicant management to
uploading of CVs by the candidate (sometimes referred to as career portals, allowing firms to access
the same tools as used by commercial recruitment agencies)
• training solutions for managing courses: scheduling, budget and course documentation
• work patterns and effective performance analyses, for most efficient approaches to work shifts and
ergonomics/design of work patterns and rotas
• analysis features which can be customized to the needs of the employer, perhaps producing charts
and graphs required for presentations as well as management interpretation and action
203
The employment relationship
• links to social media platforms and guidance on how to use them for collaboration and connections
across different parts of the company, to improve communication and engagement of personnel
across a multi-site organization
• 'HR Dashboards' can be part of some systems, providing analysis and metrics on-screen, segmenting
the workforce data into different formats as required by management, e.g. payroll summaries, salary
costs, overtime trends, sector benchmarks against which to judge HR performance trends and
achievements.
Auditing HR
As with the contemporaneous HR Dashboard concept, some of the largest employers also conduct
detailed studies periodically which provide a complete breakdown of their workforce, from job grades
and salary bands to age profile and lengths of service. There may be a requirement to review staff training
activities, qualifications levels, performance assessments and appraisal data. Put together, such informa-
tion may provide a dossier of data to underpin and inform an HR planning function. It may also be
useful to try to determine the economic value of the human organization by placing values on all
activities, such as recruitment and training, and in effect preparing a human resource account. This
approach, sometimes referred to as human asset accounting, can be relevant if the HR team wish to find
correlation between business success and profitability and the input from HR activities.
However, it is a difficult task to discover and calculate absolute correlations between HR inputs and
business success outputs. Contemporary management strategists, especially in the hospitality and
related service sectors, do not always need the hard evidence of values to convince them that their
human resources are key to commercial viability; or that planning, both strategically and operationally,
is an integral and essential part of managing a hospitality enterprise in the twenty-first century.
Armstrong, M. (2012) A Handbook of Human Resource Management Practice, 12th edn, London:
Kogan Page.
Chartered Institute of Personnel and Development (CIPD) (2012) Managing a Healthy Ageing
Workforce: A National Business Imperative, London: CIPD Publications.
Holbeche, L. (2001) Aligning Human Resources and Business Strategy, Oxford: Butterworth-
Heinemann.
Kerfoot, D. and Knights, D. (2012) 'Managing people: contexts of HRM', in Knights, D. and Willmott, H.,
Introducing Organisational Behaviour and Management, 2nd edn, Andover: Cengage Learning EMEA.
Pratt, K. J. and Bennett, S. C. (1990) Elements of Personnel Management, 4th edn, Wokingham: GEE.
Storey, J. (2007) Human Resource Management - A Critical Text, 3rd edn, London: Thomson.
Torrington, D., Hall, L. and Taylor, S. (2008) Human Resource Management, 7th edn, Harlow: FT
Prentice Hall.
Members of the UK's Institute of Hospitality (IoH) can access publications including Management
Guides which summarize key information of relevance to hospitality operations
(www .instituteofhospital ity.org).
Members of the UK's Chartered Institute of Personnel and Development (CIPD) can access a range of
materials including Fact Sheets and articles from over 300 online journal titles relevant to HRM. CIPD
members and People Management subscribers can see articles on the People Management website
(www.peoplemanagement.co.uk).
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HR planning and information systems
2 What are the critical differences between strategic HR planning and operational
HR planning?
5 What aspects and HR performance measures would you want as part of the data
analysis on an 'HR Dashboard'? Consider an organization with which you are
familiar as a context for answering this question.
205
Productivity and labour costs
In any industry in which labour is a significant cost, its monitoring and control is vital in ensuring profit-
ability. This is certainly the case in the hospitality industry, especially in high labour costs regions such as the
UK, European Union as a whole and North America. It is also the case that the hospitality industry must also
consider the workforce as a key element in the provision of a quality product and standard of service. Hence
any consideration of controlling labour costs must be simultaneously assessed alongside the need for
maintaining the desired levels of quality and of service to the standards required to meet the expectations
of customers. This is the challenge of understanding and monitoring productivity of the labour force.
The hospitality industry has frequently been criticized for its low productivity levels and apparent lack
of concern and knowledge about its performance outside of the raw data of profit and loss accounts Uones,
2007). In many ways it can be reasoned why this should be the case. Productivity measurement in terms of
ratios of inputs and outputs has its history embedded within the manufacturing sectors, with mass
production assembly lines being the epitome of a quantifiable situation where inputs of labour could be
evaluated by the numbers of finished products and articles coming off the line and out of the factory.
Motor car production under the precepts of scientific management and Taylorism (see Chapter 2),
heralded an age of accurate and meaningful productivity measurement. The inputs and outputs of the
service sector, including hospitality, are less easily evaluated. Outputs are particularly challenging in terms
of accurate evaluation, often connected with intangible factors such as customer satisfaction, customer
perceptions of value for money and the equally intangible combination of substantive consumption and
emotion (the symbolic consumption) that determines the success of hospitality experiences.
The hospitality industry also has peaks and troughs of business, has many different departments and
specific technical skills, and has inputs of the employees' interpersonal behaviour which are so difficult to
put a value on with any certainty. A licensed retail chain may be able, through its sophisticated EPOS
(electronic point of sale) technology, to gain an hourly assessment of transactions per employee, but how
can that information be used to effect in the light of the periods within a day of sharply fluctuating sales
volumes? However, this use of information technology does provide a basis for comparison and analysis
and is only meaningful when compared with the inputs of labour costs. These costs form the comparator
measurement for most productivity systems, such as a hotel using the basic measure of total revenue per
hour worked, or rooms sold per hour worked or food revenue per hour worked in the food and beverage
operation. It can be seen that at the heart of the issue of productivity is a need to have accurate but
relevant labour cost and payroll information (the monetary inputs) in order to be able to take managerial
decisions about the effectiveness and efficiency of the outputs such as revenue, average spend, rooms
serviced in housekeeping and customer satisfaction.
206
Productivity and labour costs
INPUTS, e.g.
INFLUENCES,
e.g. PROCESSES,
e.g.
labour Training HR policy
Wage rates Job design
Government Training
policy Remuneration
Trade unions policy
Taxation Retention rates
Social security
charges
207
The employment relationship
A fast food takeaway operation or a high street wine bar may operate with a labour percentage of around
15 per cent (alongside low selling prices), whereas a high-class restaurant offering skilled personal attention
may need to operate at around 35 per cent labour cost (alongside high selling prices). Likewise a modern
three-star hotel with minimal personal service can operate at around 18-20 per cent labour cost while some
five-star hotels may need to spend up to 37 per cent on labour. Such percentages also vary from country to
country, dependent on local workforce legislation, social and statutory costs and the level of trade union
activity or national agreements. Of interest to HRM practitioners is also the influence of the level of multi-
skilling across the workforce. Clearly there are potential productivity implications of a flexible workforce,
employees able and willing to help out in a range of tasks across the business, thus giving management an
invaluable tool in covering particular peaks in business activity Uones, 2007).
In establishments at the smaller end of the scale, which make up such a large percentage of the
hospitality industry, a factor influencing labour costs is whether an establishment is run by the owner or
by an employed manager. Proprietors who are also managing the business can influence labour costs in a
number of ways. First, some owners pay themselves unrealistic wages for a variety of reasons, not least
to minimize tax liability. Second, owners are generally motivated to be much stronger in controlling
cosrs (doing more hands-on work than their managerial counterparts). Third, they avoid employing
excess labour as cover forthemselves and for other employees. The labour percentages in Figure 18.2 are
Type of outlet Percentage range (as a percentage Factors which can affect labour percentage
of revenue) per annum
low high
208
Productivity and labour costs
intended to indicate the approximate level of labour cost (as a percentage of revenue, net of value added
tax) likely to be encountered in viable establishments. This does not mean that there are not successful
establishments operating outside these ranges. Likewise, it must be recognized that labour costs are
partly fixed and partly variable, so if trade drops dramatically there is a point beyond which labour costs
can no longer be reduced to maintain them within the normally accepted percentages - a problem all too
familiar to the management of seasonal establishments.
In some cases the wage percentage may well be reviewed on an annual basis. Most organizations,
however, monitor labour costs on a shorter-term basis, monthly or maybe even weekly, with many of the
fast food outlets now planning labour on an hourly basis.
Figure 18.3 illustrates a format used by some fast food operators. The consequence of this precise
hour-by-hour planning is that labour costs are planned and controlled accurately to precise percen-
tages. Such systems can also be linked to the 'HR Dashboard' information system reviewed in
Chapter 17. One of the international fast food chains operates branches at around an 11.5 per cent
labour cost, with management costs ranging from 2 per cent for the most efficient and busy branches up
to 6 per cent for others. All employers must also consider the on-costs of labour costs, the national
insurance payments that have to be made and other issues such as social security/sick pay schemes and
pension schemes with contributions from the employer. As indicated above, the level of on-costs can
vary markedly between countries, with much higher rates in countries like France and Sweden, much
lower in the UK and USA.
Productivity measurement
As already mentioned, one of the problems of using labour percentage as the main means of labour cost
control is that it does not indicate whether the cost is the result of employing a large number of low-paid
people or of employing fewer people but paying them a higher wage. In addition, in many food service
contracting sectors of the industry, such as school meals provision, hospital catering and employee meal
services, labour costs cannot be expressed as a proportion of revenue because there may be little or no
revenue, or because subsidies distort the picture. Other measures, therefore, become necessary. Basically
these are concerned with relating labour input to the various forms of output. Such measures include
physical and part-physical, part-financial measures and they vary among the different sectors and also
within departments. These may be based on some constant (i.e. a factor unaffected by inflation) such as
time. Some examples are shown in Figure 18.4. It should be borne in mind, however, that direct
comparisons can be dangerous; for example, in one contract-catering situation a 'main meal' may
offer each customer a wide choice, whereas in another situation there may be little or no choice.
Other factors such as shift work and night work also play an important part, as do national and
international work patterns; for example, an Industrial Society survey (Catering, Prices, Costs and
Subsidies) showed that for every individual catering worker employed, about 22 main meals were
served. The author's own consultancy work shows that in some other European countries the number
of meals served is frequently between 50 and 60 for each food service contract-catering worker
employed. The list in Figure 18.5 is taken from one North American hotel. Not all items listed are
direct measures of labour cost or productivity but they all inform management decisions, most of which
will affect staffing and HR planning (see also Sigla et al., 2004).
In order to develop a more meaningful and comparative productivity measurement system or scheme,
a hospitality manager must not only determine what the inputs are exactly, but also must set benchmarks
for all activities and operational departments covered by the scheme. Agreeing benchmarks with other
managers and departmental heads also provides a means of setting realistic targets and performance
goals. Benchmarking is a very useful approach to the monitoring of productivity levels and of comparing
209
The employment relationship
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For example the overall average rate of a hotel (revenue per worked hour) and its business mix
(individual check.ins versus group/airline crew check-ins) impact scores. In terms of F&B [food
and beverage] productivity, results are highly affected by the restaurant concept (buffet versus a la
carte), and the physical structure of the resta urant.
For larger businesses, it is also noteworthy that the onward march of technology and IT/CPIS systems
(see Chapter 17) to support hospitality managers has also reached the important subject of productivity
and workforce costs. In addition to the generic computerized personnel information systems (CPIS)
discussed in the previous chapter, there are now a range of software applications available to hospitality
managers which address the specific challenge of productivity, labour costs and the efficient scheduling
and rostering of employees. One leading provider proposes that its system enabled productivity levels to
be enhanced, customer service improved and quality undiminished by use of its software. One such
system offers and claims the following features:
210
Productivity and labour costs
Catering
Employee meal 1 Number of meals served by each member of 30 meals a day
service staff (full-time equivalent)
2 Covers served per paid hour 4.5 covers
3 Paid minutes for each meal served
plate wash 7 minutes
food service staff 24 minutes
cooks 15 minutes
Coffee Shop 15 minutes
Public houses/bars Barrels and barrels equivalent per full-time 3---7barrels per week
equivalent
211
The employment relationship
It may be considered somewhat ambitious that a system of technology can achieve such lofty goals, but it
may be appropriate in multi-site and multinational organizations to assess the value of such a system and
to test its claims against its own outputs. The most important point is that hospitality managers,
whatever the size, type and location of the business, should undoubtedly consider those productivity
measures that are significant for their particular business, and ensure that they have the most relevant
data on labour costs available for the measurements to be meaningful. A summary of some examples
follows.
Added value
This method assesses the value added by each pound spent on labour. It is calculated by representing the
gross profit (sales less material costs) as a proportion of the labour cost.
Materials-to-labour ratio
In many contract-catering operations where there may be little or no revenue, or where there is a subsidy
element (e.g. hospitals, schools, employee meal services, clubs), expressing labour costs as a proportion
of sales is either not possible or can be meaningless for comparative purposes. Other measures are
therefore necessary - these can include the materials-to-labour ratio, i.e. how much labour is needed to
process the materials required. In hospitals this can be around a 1:1 ratio, whereas in some school meals
operations it can range from around 0.4:1.0 in centralized production operations to as high as 2.6:1.0 in
some labour-intensive, localized production systems.
Effective use of available labour is obviously one of the key measures to controlling labour costs. Other
factors to take into account include considering alternative ways of getting work done which can reduce
the payroll burden. For example, some hospitality companies use contract cleaners to service their hotel
bedrooms, even contract caterers to provide staff meals. Whilst this may appear an expensive method in
the short term, in the long term their labour cost is reduced and management can concentrate their
efforts on the core business.
212
Productivity and labour costs
213
The employment relationship
Members of the UK's Chartered Institute of Personnel and Development (CIPD) can access a range of
materials including Fact Sheets and articles from over 300 online journal titles relevant to HRM. CIPD
members and People Management subscribers can see articles on the People Management website
(www.peoplemanagement.co.uk).
Describe the objectives of and alternative approaches to labour cost and productivity
measurement.
3 Discuss what external factors influence (a) labour costs and (b) productivity.
214