Travel Australia Tour
Executive Summary
Travel-Roo is a small tour company that caters for travellers that wish to discover the beauty of Western Australia within reasonable time and budget. Travel-Roo is locally owned and operated, boasting personal touch with only 25 employees and a vast pool of knowledge and experience.
Being a tour agency, Travel-Roo's business strategy is strongly customer-oriented. The uniqueness of the travel industry whereby employees partake in a holiday-like job makes the design of remuneration system challenging. Safeguards are introduced to ensure an equitable remuneration and rewards system.
Before deciding on the pay system, sufficient job analysis and evaluation has to be done to determine the actual nature and descriptions of the jobs in Travel-Roo. Job evaluation can be done whether non-analytically or analytically. These techniques are used to determine the importance of the job content. However, since Travel-Roo does not have many different types of jobs, a simple yet thorough process of job analysis and evaluation would be adequate.
For Travel-Roo to attract and retain quality employees, a reward strategy must be developed. This would include an attractive pay system that is the core of rewarding employees. If Travel-Roo could implement an effective total remuneration system, potential and current employees would definitely be keener to join the family.
After the implementation of the most appropriate pay system, a systematic evaluation process should be done. Employees should be satisfied with the pay and pay system in their workplace. Any dissatisfaction should be dealt with immediately to avoid any further discontentment amongst employees.
A contingency plan has also been devised for Travel-Roo to be prepared for any possible unforeseen circumstances.
1.0Background
Travel-Roo is a tour and travel agency that operates adventure tours for travellers who wish to explore the vastness and rugged beauty of the Western Australian Outback. Locally owned and operated, Travel-Roo offers a true insight to the many hidden treasures and unique highlights that makes Western Australia truly memorable. In 1997, XYZ Tour and Travel began operating tours for travellers, backpackers and students who have limited time and budget, but want to see as much of Western Australia as possible. From half-day to 14-day tours, the aim is to make sure everyone has a fantastic time and informative trips designed to show the magnificent contrasts of the beautiful state at its best (Adventure Tours in Western Australia 2008).
Travel-Roo is proud to be Western Australian owned and operated. It has expanded considerably from two people to a team of 25 employees, a depot and a modern fleet of 14 air-conditioned buses. There are five main tours operating and charter tours are available on request. Travel-Roo is recommended in the leading travel guide books on Australia such as Lonely Planet, Rough Guide and Let's Go (Adventure Tours in Western Australia 2008).
2.0Safeguards
Travel-Roo's business strategy emphasizes on customer service. Travel-Roo aims to maintain a high level of both customer and employee satisfaction. Timo and Davidson (1999, 22) stated that work in tourism is integrally linked to the concept of leisure. The rigid boundary between work and leisure becomes blurred as notions of work and play, holidays and fun are intermingled with service and product, promotion and reward.
Therefore, Travel-Roo would need to take a holistic approach to establish how rewards can go beyond satisfying immediate needs by answering the question of how to pay the right people, the right amount, for the right reason, at the right time (Gross 2001, 6). Due to the variance between the nature of the travel industry and other industries such as manufacturing whereby personnel is the key to success in the travel industry, an effective remuneration and rewards system is even more vital.
To ensure that an equitable system of remuneration and rewards is introduced, certain principles and safeguards would need to be introduced (Remuneration Report 2006-07, 18):
- Remuneration must be closely linked to the company's objectives of providing friendly and innovative tours to meet customers' changing needs and achieving sustainable and profitable growth
- Remuneration is set at competitive and fair levels
- Remuneration will take account of performance in relation to environment, social and governance matters
These safeguards are implemented to (Riley 1996, 127-8):
- Ensure that sufficient numbers of people are attracted to the organisation from the labour market
- Encourage the internal labour market to function correctly
- Ensure that feelings of inequity are not provoked
3.0Job Analysis and Job Evaluation
According to Milkovich and Newman (2007, 87), job analysis is “the systematic process of collecting information that identifies similarities and differences in the work”. Job analysis needs to be done by Travel-Roo to obtain information such as skills and experience required by tour guides to determine the appropriate reward system.
On the other hand, job evaluation is the “process of systematically determining the relative worth of jobs to create a job structure for the organisation” (Milkovich and Newman 2007, 115). The evaluation is based on a combination of job content, skills required, value to the organisation, organisational culture, and the external market.
To reinforce that definition, Riley (1996, 128) explained that job evaluation is about job content and pay structures. It is not about levels of pay or pay systems, although it is closely associated with both.
To develop or update job descriptions, each job is evaluated according to its worth to the organisation. The results of job evaluation are then used together with external market pay data to develop the pay structure. (Cooke 1996, 44)
Job evaluation needs to be considered alongside the other factors which affect the setting of pay scales such as (Roberts 1995, 155):
- Availability of and competition for skilled labour
- Prevailing economic climate and demand for its services
- The scale or range of benefits associated with particular jobs
- The scale of hardship or risk associated with particular jobs
The use of such job evaluation schemes can provide the company with the opportunity to (Roberts 1995, 157):
- Review the particular demands of jobs and roles in respect of skills and training required
- Review existing personnel policies and procedures in light of changing work practices and personnel requirements
- Identify potential problems related to the recruitment and selection of personnel in respect of pay and benefits
- Ensure that pay and benefits are offered on an equal basis thereby reducing the possibility of legal cases in respect of legislation
- Prevent disputes between staff related to pay and benefits
- Assist the identification of appropriate and accurate job descriptions and person specifications
3.1Non-Analytical Job Evaluation Schemes
According to Roberts (1995, 156), these schemes tend to concentrate on the perceived worth or merits of particular jobs and place them in a form of ranking or hierarchical order. They are simpler to undertake and are more appropriate to organisations with either small numbers of employees or limited types of jobs.
3.1.1Job Ranking
Each job is identified by its basic title or perceived worth and then placed in a ranked order; pay and benefits are then awarded to jobs or individuals in respect of where they are placed in the hierarchy.
3.1.2Job Classification
Overall grades of jobs are identified and specific definitions of the grades produced; key jobs are then evaluated to both validate the definitions and to provide benchmarks for other jobs to be judged against.
3.2Analytical Job Evaluation Schemes
More complex analyses are undertaken with a variety of methods used under the analytical job evaluation scheme. The organisation may look at a number of variables which make up the specific characteristics of a particular job.
3.2.1Points Rating
The most common method of evaluation is the points rating technique. This scheme attempts to break down jobs into a number of factors, such as skills and responsibilities, and with more complex schemes other factors, such as dexterity, decision making, time demands and necessary attributes are included. Points are awarded for each factor according to pre-set scales and the total points decide a job's place in the ranking order (Roberts 1995, 156).
3.3Recommendation
As Travel-Roo is a small company with a team of only 25 employees, it should be sufficient to perform a job analysis to determine what skills and competencies employees need. The content of the job can be evaluated and compared with the market labour trends to come up with a suitable remuneration and rewards system.
4.0Reward Strategy
Competitive conditions in the marketplace make it more difficult for employers to acquire and retain experienced and productive talent. The growing awareness that attracting, motivating, developing, and retaining employees is a key component of business success has raised expectation for human resource departments. The reward programs that have been the traditional domain of human resource (e.g. pay, benefits, training) represent a significant and growing investment for an organisation (Gross and Nalbantian 2002, 53).
Gross and Nalbantian (2002, 53) discussed that these programs have been managed independently rather than as part of an overall strategy. As leadership looks to human resource to support the organisation's business objectives and enhance profitability, some tough questions need to be answered:
- How can we attract and retain the right people?
- How do we motivate and develop employees?
- Do we know what skills, knowledge, experience, and behaviours we actually reward?
- How do we pay for performance?
- Are pay, benefits, and career investments aligned with each other and with our business strategy?
- How do we measure the return on our investment in people?
4.1Pay System
The strongest findings of pay research have been that people have quite separate feelings about pay and the pay system which produces their earnings. By pay system, it involves the system of overtime, bonus, basic, gratuities, etc that is used to make up the final pay packet (Riley 1996, 68).
The hospitality industry's image in the area of pay and reward has not been good whereby many jobs still offer low pay, minimal benefits and long working hours (Roberts 1995, 134). According to Riley (1996, 127), companies that wish to retain staff and motivate them through loyalty might adopt a paternalistic pay philosophy whereby all employees receive all benefits from their first day - nothing is conditional.
Travel-Roo should adopt such systems whereby all employees are given the benefits from the first day of work without waiting for the probationary period to end. When employees feel that they are valued, they will naturally perform better.
Employees of Travel-Roo will be given a starting base pay with slight variations depending on the amount of experience they may have, and salary increases based on frequently-conducted review and evaluation. This shifts the company's remuneration system towards elements of incentive pay and reward systems, whilst retaining a base of basic wage rate system. The base wage rate system sets a rate for a particular period. Such pay is usually set for an hourly rate, weekly wage or annual salary, with minor differentials in respect of age, qualifications and length of service (Roberts 1995, 138).
In addition to the base wage rate system, Travel-Roo could introduce the incentive pay systems through a variety of approaches (Roberts 1995, 139):
- Merit rating, where an individual employee's pay is linked to the rating or assessment of personal qualities
- Skill pay, where individuals are paid set levels in respect of reaching predetermined competence in specific tasks and responsibilities
- Flexible pay systems, where individual employees opt for their own remuneration package made up of a variety of benefits, such as bonus, pension, leave entitlement, car and private health care
In the travel industry, traditions of high levels of seasonal, part-time, casual and female labour are highly recognised. Sectors of tourism, hospitality and leisure fall readily within the working experiences of a high proportion of the population in many developed countries, especially work at an operative level. Much of this work is part-time, casual and seasonal, undertaken when people are school or college students (Baum 2006, 118).
Besides that, hospitality employees are frequently offered relatively poor remuneration in return for perceived attractive additional benefits, notably travel opportunities and, generally, a pleasant working environment. This situation exists despite the relatively demanding professional and personal qualities which are required for entry (Baum 2006, 122).
Travel-Roo is aware of the perception regarding the low-paying hospitality industry. Therefore, the company offers a competitive starting base wage rate to attract a pool of suitable candidates. Pay raises are also given through frequent performance review and evaluations. Moreover, Travel-Roo attempts to create a pleasant working environment whereby employees function as a family. A sense of belonging may be created through the various effort of Travel-Roo such as having a flat hierarchical structure and allowing full autonomy by employees during excursions.
4.2Total Remuneration
The total remuneration approach is defined by Pauly and Rosenbloom (1996, 47) as “Looking at the cost and value of all elements in the employment package together: salary, bonus, long-term incentives, benefits, perquisites, discounts, work/family programs, and other tangible and intangible rewards of working”.
One strategy of total remuneration might be termed “meet the market”. The basic idea is simple: Given the number and type of employees that a firm wishes to hire, it chooses its compensation package for each type of employee so that current and potential employees view its offer as equal in value to what they could receive from other employers hiring in the same market (Pauly and Rosenbloom 1996, 48).
A second philosophy might be termed “please employees on a budget.” This philosophy determines compensation in two steps. First, the employer decides how much total compensation expense per employee is to be incurred. Then the firm must decide how to divide that total among money wages and various benefits categories (Pauly and Rosenbloom 1996, 48).
Also, Pauly and Rosenbloom (1996, 48) argued that the third philosophy is “minimise compensation costs.” This approach views the firm's objective as that of choosing the mix of wages and benefits that allows the firm to attract and retain a given type of workforce at the lowest total cost to the firm.
Another method of total remuneration is for a company to deal with its benefits by means of a flexible benefits program. A flexible benefits program may allow employees to choose to spend their benefit dollars on almost any item of value, or to take cash wages. Despite the difficulty of implementing such a remuneration system, Travel-Roo could allow its employees to choose their own remuneration package that includes benefits such as gym membership, mortgage repayment, annual leave buy-backs, etc as this is a great attraction to employees.
(Kantor and Kao 2004, 9)
The figure above shows components that may make up a total remuneration plan. Having covered a whole range of varying components, employees may feel more satisfied and motivated to perform at work.
5.0Evaluation
Riley (1996, 124) explained that evaluation is “the visible results of the employee's work which the control system measures, what the employee is good at, what the employee likes doing”.
The structure of pay differentials is an intimate part of the structure and functioning of the organisation (Riley 1996, 127). He also argued that the greater the differentials the more significant pay are in the relationship between workers. Simply because pay is distributed differentially by management it follows that there has to be some overall justification for the differentials, this rationale has to be acceptable to the staff and questioning the structure is questioning management's authority and judgement.
To evaluate the pay system, labour market surveys can be done to measure the differences between occupations and organisations in a defined labour market area in terms of absolute value of pay, increase or decrease in value over time, the rate of increase or decrease over time (Riley 1996, 137).
6.0Contingency Plans
If labour availability does decrease, then competition for skilled labour will then increase. This will lead to a rise in the basic rates of pay linked to more comprehensive remuneration packages. Skilled, mobile labour will be drawn to the companies which offer attractive packages. However, the retention of such staff is linked to more complex issues, such as job satisfaction and personal security (Roberts 1995, 134).
Demographic trends may influence the availability of labour and customer-related factors. These demographic trends may include (Roberts 1995, 251):
- Availability of appropriate labour within an area
- Decline in school leavers, which will affect any manpower strategy and personnel aspects, such as recruitment and selection, pay and benefits, working hours and patterns and training and development programmes
- Alternative in customer demand and expectations of both service and staff
- Decline in demand from certain areas due to economic factors which will affect the level and number of staff required
Changes in customer demand may also influence the demand and supply of labour in the travel industry (Roberts 1995, 251-2):
- Increase in disposable income despite recessionary periods
- General rise in customer expectation in respect of value for money and improved levels of service
- Improvements in both quality and service for industry itself, thereby generating increased customer expectations
- Increased knowledge and concern of the public with regard to health and safety and food hygiene issues
Other contingency factors may include:
- Emergence of strong and direct competitors
- Skills shortage
- Economic downturn
- Weak exchange rates resulting in a decrease of international travellers
In preparation for the possibility of a skills shortage, Travel-Roo could consider implementing talent management as part of its human resource strategies. The company could train local talent as part of their team.
7.0Conclusion
In recent years, the basic economic theory has been utilised to evaluate not only physical assets but also human capital. Organisations that do not apply a rigorous return on investment methodology for human capital may find themselves at a competitive disadvantage. Paying too much is costly and paying too little for critical skills can make it difficult to retain good workers. It's the interrelationship between current and future pay, benefits and career opportunities that can influence employee behaviour and shape the work force. Simply put, an organisation becomes what it rewards. (Gross 2001, 8)
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