Human Resource Issues in the Hospitality Industry.
By Philip Lye
Wednesday, 27th June 2007
Many businesses in the hospitality industry - both small and large have difficulty in understanding their human resource and employment relations obligations whichever country or countries they operate in!

This is understandable given the raft of legislation and regulations governing (drowning) the employment environment in which governments seem to revel in.

The hospitality industry is certainly no exception and in many cases is more complex than the average business.

In this publication Biz Momentum will outline important employment matters that will assist in reducing the ‘stress' factors you may be experiencing directly related to the hospitality industry which Biz Momentum is actively involved in a hands on capacity.

Did you know; 

 It has been reliably estimated that 75% of businesses do not have an employee agreements and employment related policies & procedures. In the event of a dispute the law will decide for you and this almost always goes against you, the employer;

Worldwide bullying and sexual harassment claims are escalating. The average cost of a claim is $36,500 - $250,000 and recently in one country an employee was awarded $1,000,000. This comes directly off your bottom line profit;

Workplace rape and sodomy is on the increase in the hospitality industry and we have witnessed the resultant trauma, ill will and bad publicity for your hotel, restaurant or workplace where this occurred;

Workplace stalking through employees following, sending emails, voice messages and gifts is becoming more prevalent and is resulting in increased absenteeism and resignations;

Theft of your inventory such as quality wine, food and equipment is rampant!

Misuse and unlawful use of your facilities for personal gain is increasing;

It has been reliably proven that some employees use up to 2 hours per day of your email and internet facilities for personal gain and to access unlawful sites such as hate literature and pornography not to mention chat lines.

Many hotel and restaurants deliberately flout occupational health and safety rules which is resulting in increased staff turn over, fines and costly pay-outs to employees;

Many managers do not understand or have the experience in the know how of how to manage and lead employees. People skills a re paramount to your business success.

Not having an adequate job description and controlling management behaviours can be a cause of psychological injury resulting in hefty fines not to mention the process of litigation which we have seen take up to 3 years to resolve

This is far from an exhaustive list but covers a number of growing issues in which Biz Momentum has noticed in recent years affecting the hospitality industry.

The ‘Basic Ingredients' for managing employment risks:

There are certain steps you can take to minimise your employment risks. Biz Momentum have provided some general employment advice regarding managing employment risks however we need to advise you that each business has its own unique profile and therefore decisions must be made on that businesses individual merits.

1.  Job Descriptions

A simple yet effectively written job description cannot be overlooked when hiring an employee or manager.

Employees and management need to understand what they are responsible and accountable for as well as what core skills they require to safely perform their duties.

Case 1 – The Restaurant who thought paperwork was a waste of time

Recently a restaurant was sued by an employee for $325,000 for psychological injury. The employee had worked in their position for two years and asserted that they had been injured because they didn't receive a job description.

The matter is proceeding to court with attorneys appointed on both sides.

The claim is completely spurious and yet the legal system is set up so that the employee will be compensated. The business did not have a job description. Employees are more inclined now to take you on and engage contingency fee lawyers to sue you (no win – no fee lawyers)

It is not only the cost of litigation but preparation, meetings, affidavits, interviews and stress on the business owner.

2.  Employment Agreements

An employment agreement sets out the boundaries and expectations of the employment relationship and is a critical document for the protection of your business.

Employment agreements must contain employee benefits and obligations. Failure in having a well written employment agreement leaves you open to the courts and tribunals interpreting your obligations for you.

The hospitality industry in diverse with many different types of employees in-house. Every employee from the cleaner to maid, front of house, head chef and apprentices, wait staff, maintenance workers, office workers and all others must have a job description otherwise you face stiff penalties when things such as accidents and incidents all goes wrong.

Common clause include hours, leave, goodwill, business records, restraints for management, confidentiality, intellectual property, remuneration and benefits, requirements of the position, privacy, ethical constraints, use of business assets, warranties, responsibilities and much more.

There are many types of agreements that your business can choose from but each business must be assessed on its own circumstances and merits.

CASE 2:   The Hotel Partner that changed their mind

A hotel's business was severely impacted when a Partner working in a boutique hotel for 5 years left and the other partners had not bothered arranging an agreement or restrictive covenant clause as the Partner after he made it clear that after a 3 year term he would be travelling overseas for some time.

However the person changed their mind when they began a personal relationship in the local city. Subsequently the partner left the hotel and started there own business around the corner.

The original hotel and restaurant lost a great deal of their previously loyal patronage.  It is not uncommon for customers to quickly find out you have lost a key person in your business and follow them elsewhere.

This was a very costly error resulting in much goodwill and profit leaving the business. This could have easily been averted by ensuring that all parties signed a well written Partnership and Employment containing restraints, ownership of goodwill to name a few clauses.

Now may be a good time to ensure you have up to date employee agreements for all levels of employees including senior management. Senior Management is often overlooked and this is to your peril.  The days of trust are disappearing where your best employee today can be your worst enemy tomorrow if things go wrong.

Imagine the consequences to your business if this happened to YOU.

4.  Policies and Procedures

A human resources policy and procedures manual is an essential tool protecting your business only if the manual is implemented and used appropriately.

Failure to implement effective policies and procedures and to comply with them will result in the courts and tribunals interpreting your obligations for you in what will be an expensive exercise.

In addition not having the correct policies and procedures can constrain you from taking certain action that could have been taken in the event you have clearly stated policies and procedures.

Drug and Alcohol testing is one area that many in the hospitality industry have fallen foul of by making rash decisions and firing the employee only to find themselves being subjected to litigation.

Common policies and procedures Biz Momentum recommend for the hospitality industry include appointment policy, children at the workplace, customer/employee relationships,  code of conduct, computer user policy, anti discrimination prevention, drugs and alcohol, employee dress and grooming, laptop computers and equipment, leave, use of mobile phones, motor vehicles, privacy and freedom of information, sexual harassment prevention, stress prevention, termination of employment and employee discipline, workplace harassment and workplace health and safety.

These policies must be tailored for each section of your business; eg restaurant, maintenance et al.

Case 3 - Unfair Dismissal & Sexual Harassment

In another unsatisfactory situation an employee was dismissed for consistent poor performance. Her Lawyer subsequently suggested that she sue the employer for unfair dismissal and sexual harassment.

Clearly this is extremely stressful for the business owner.

The situation could have easily been averted by a discipline and termination policy and procedure and a Sexual Harassment Prevention Policy.

Sexual harassment and workplace bullying are rapidly immerging as one of the scourges of all businesses and in our experience it is particularly prevalent in some sectors of the hospitality industry.

Biz Momentum has assisted the hospitality industry in advising in situations of workplace rape and sodomy from an employment perspective. Naturally all such incidences should be referred to the authorities for investigation.

However you are required to have a workplace rehabilitation assistance program in place should the person be willing to return to work or not and that's just a start of what you must do.

5.  Induction Process

Inducting employees into your ‘Business' should be structured process!  Your employees are taken through your Business policies, procedures and work manuals in a formal manner.

Whether Management or line staff they must complete the process with a sign off procedure to say the have understood the requirement to comply with your policies and procedures.

The importance of this process cannot be overstated. Recently we assisted a business who was being sued for $300,000 for an employee asserting they had not been inducted and the employee lost because the business could produce and prove that induction had taken place.

Biz Momentum can takes you through an induction process that is streamlined and takes less than 1 - 4 hours for a new employee depending on the size and complexity of your business. Biz Momentum often conducts inductions on behalf of the business as we are considered experts in this area.

Case 4 – The Thief, the Wine, the Video Line

In yet another seemingly open and shut case a well known hotel business owner caught the head chief of his restaurant stealing a bottle of quality wine via video taping that was operating in this hotel.

Angry at the theft the hotel owner sought to instantly dismiss the employee and decided to take advice at the last moment with Biz Momentum.

This was a good decision on his part.  Even though the owner had video proof of the employee's theft the owner was still obliged to allow the person caught stealing the opportunity to ‘show cause' or tell him why he should not have been dismissed.  This is commonly referred to as natural justice: allowing the person to put their side of the matter to you.

Secondly the hotel did not induct its employees that they were subject to video surveillance which proved to be a problem for the hotel.

The hotel owner subsequently decided to issue the head chef a written warning and the head chef subsequently resigned. This was a good outcome for the hotel, a good lesson to its other employees as well as protecting the owner from potential litigation.

The moral of this case study is that you must be wise and take advice and consider all the facts (theft and surveillance were not the only issues) before you fire an employee.

6.  Communication

Communication is the oil that makes a business work effectively and efficiently. Most grapevines and gossip thrive in a communications vacuum.

Be quick to correct your concerns on a day to day basis with your employees and avoid the cost of procrastination whereby time and emotion now interplays and the issue gets all blown out of all proportion.

We can show you how!

7.  Reward and recognition

We all appreciate a ‘thank you' and ‘well done' from our customers and other people who matter to us. Employees are no different and regular positive feedback at times reinforced by a tangible reward goes a long way towards establishing a culture of trust and high morale.

We all know that costs are increasing however develop a generous spirit with your employees and ensure they are remunerated fairly and well.

The reward to you will be diminished turnover and a good reputation. Studies have shown many of your employees will remain with you because of the work environment and morale even when they are headhunted with a better offer. Money is not always the key dominant factor in retaining valuable employees.

Many managers try the carrot and the stick approach to managing employees and it has been estimated that up to 60% of managers are ill equipped to manage people and are seriously lacking common skills such as courtesy, understanding, tack and listening skills.

It's really like letting a bull run rampant through a china shop. The disaster becomes apparent and it is often too late to fix.

Biz Momentum has many years experience in advising businesses in employment issues.  We regularly conduct seminars to educate business owners in their obligations and have assisted many businesses in the hospitality industry with practical solutions, training and mentoring in employment matters and have undertaken international work where requested and resources are available.

Philip Lye is Director of Biz Momentum Pty Ltd. He works with businesses to help them cut through the maze of people matters. Clients get specific actionable strategies to protect their business interests. Philip has considerable cross cultural experience having previously worked in Oceana, Asia, the USA, the Middle East and Europe. For more information on Philip, visit www.biz-momentum.com and subscribe to his free monthly e-zine and find other helpful articles that will assist your business. Biz Momentum is based in Australia.

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