How "Dynamic Pay" Overcomes Staffing Challenges - Amy Smith and Rachel Paley, The Saratoga Arms Hotel

Josiah: Thank you both for taking the time to chat. Amy, we were talking about before we hit recording, it was a year ago, which I can't believe we last spoke. We were talking about your beautiful hotel. I'll include a link in the show notes because I'd really like people to go back and listen to that conversation. I was really inspired by how you operate. But the reason why I wanted to reconnect, or one of the reasons I wanted to reconnect, is that you are doing something at your hotel that I think is brilliant, and that is apply some of the thinking behind yield management to how you think about staff pay. And I feel like it's interesting. I spent a number of years in my career working in the revenue management world. It makes a lot of sense, demand ebbs and flows. And there's also, of course, something that all of our listeners are well familiar with, of it just being really challenging to hire and have enough staff in hospitality businesses around the globe. Right. And you've come up with a way to take the principles of yield management and revenue management and apply them to staffing. I wonder if you could take us back to how this program came to be at your hotel. What were you observing? And then I'd love to get into what you created.

Amy: Well, yeah, this is Amy. I'll get started. We were coming out of the pandemic and we were looking to start our hiring process again. When we look at what people are really interested in, they are interested in having a quality of life. So sometimes that meant maybe they didn't want to work on the weekends or they didn't want to work overnight. So Rachel here had devised through some research and some other things that she was doing to create a great benefits package, created this sort of like yield management, different rates for different hours of the day and days of the week. Rachel can get more involved in how she sees the particulars of what that program looks like.

Josiah: I'd love to hear that, Rachel. What were you looking at and how did you think about framing this up?

Rachel: Yes, so prior to hospitality management, I had a stint working in distribution for a Fortune 50 retail company. So this is very much taking a page from their book, another 24-7 operation that is staffing all day, all night, seven days a week. And so I took a page from that book and created a shift structure that was very similar to my past staffing experience in distribution. And so all of our employees are on a pay grid. They are on set schedules and depending on the time of the day and the day of the week that they work, they have a different pay rate. That pay rate stays on that time of day. It doesn't move with the individual. So, despite them having a set schedule, if they were to pick up a shift from a coworker that is on a schedule that is different than their primary schedule, they will absorb the wage rate that is inherent to the hours that they pick up. And so if you are working in the very traditional Monday through Friday, 8 to 5 window of time, you are paid kind of the base pay rate in the scale. And then, if you're working Saturday and Sunday overnights, you are on the highest part of the pay scale. And it graduates out from that Monday through Friday to overnight on the weekends. And it's a total of six different wage rates that employees can have, depending on the desirability of the shift that they are working. We've set the grid up to respond to that need.

Josiah: I think this is brilliant because if you think about it, it just makes sense. Hotels are this interesting business, and I imagine your highest demand is on the weekends. A lot of people are traveling then, but it's also somebody, whether family, social life, whatever, it's a little harder to work on the weekends, right? And I think in the past I've heard hospitality leaders just say, that's the way it is, that's hospitality. I feel like there's a certain amount of empathy here where you're like, we get it, you're working, as you mentioned, if you're working nights on a weekend, eight to five during the week. And so you're actually putting kind of your money where the reality is there.

Rachel: Yeah. So our employees, no employee works more than four days a week for full time. No one works both Saturday and Sunday. So, if you have a partner or a spouse who is working a more traditional nine-to-five job that has weekends off, you know you're guaranteed at least one of those two days at home with school-age children or a more traditional work schedule spouse. So we're really intentional with what the shift schedule was as well to make sure that it was a work-life balance schedule that does contend with a lot of what you said. There's this perception in our business that if you work in hospitality, you're kind of succumbing to this life. And we wanted to challenge that narrative a little bit.

Josiah: I love it. So you put this together. I love the thought in the kind of six tiers of pay here. What was rollout like? Did everything go as you were expecting or what did that what was that experience like?

Rachel: I think the best story from that is that we rolled it out to one of our long-standing night auditors. He had been with us for maybe seven years at this point. And so and he worked the overnight weekend shift. So, this was just a traditional shift. So we took him from a five-evening-a-week schedule down to four. His pay went up $4.50 an hour overnight when we transitioned everybody to the pay grid. And he quite literally fell off of his chair in our dining room when we told him about the new grid and was just beyond himself thankful. He was getting one night a week back in his life and, in turn, making more money than he was making before. So, it's just a win-win overall.

Josiah: Usually, that's just a figure of speech, but that is probably the first time it occurred.

Rachel: He literally fell on the floor. On the carpet. We were doing the right thing. That was a pretty good response.

Amy: He is also a comedian, outside of the hotel.

Josiah: I like dramatic people. Sometimes, you just have to express yourself very physically. I like it. What's been the business impact? What has this done for you?

Amy: Well, I think the business impact for us has been people are more willing to take a shift over for a coworker, especially if it's at a higher rate. We have people who don't necessarily call out as much unless there is a major issue. So the morale is a lot better and they love working at the hotel and Depending on the hours, it really depends on their pay rate. But they all are making more money. And that's a win.

Rachel: Yeah. I'd also say it's an excellent recruiting tool. I am constantly serving the wages of the other. We have a lot of hotel competitors in we're a very small city, but we have a lot of competition here. A lot of major brands are in our city as well. So I'm serving wages all the time. I want to make sure that our grid is responding the wage structure that's in our city. And so you can be in not only at pretty close, most likely higher wage rates in almost all positions coming to work with us, and you have the work-life balance and wage grid piece. So from a recruitment standpoint, if people are considering multiple hotels for, say, a front desk position, we easily stand out about the rest.

Josiah: I love it. Reflecting back on this journey you've been on to set up the program and implement it, what advice would you have for others who are listening to our conversation if they're thinking about, hey, that's interesting? I'm interested in doing something like this. Any kind of reflections looking back that you would advise them?

Amy: From my perspective, because I run the payroll is it's just a little, it takes a little bit to get your hands around it. You're putting in six different, a possibility of six different wage rates per employee, depending on where they actually work during the course of the week. So it's, it takes a little bit of a startup in your payroll system, but once you get the hang of it, from my perspective, it's, it's quite easy.

Josiah: I love it. I feel like while I have you both here, I would love to hear a little bit more about what you're doing to create an environment where people love to work. I know, Amy, in our first conversation, which again I'll link to in the show notes, I encourage people to check that out, but you think very creatively about running a hotel that operates differently. And I think both guests and staff love. You also alluded to looking at the whole benefits program again. You touched on that a little bit, but I wonder if we could talk a little bit more broadly about that and get you both to brag a little bit about some of what you've created there.

Amy: Well, this is Rachel's baby, so I'm going to just hand it right off to her. She'll let you know exactly what she's created for our team here.

Rachel: Yeah, so I think in a similar vein of my overarching sentiment about our benefits package is to meet our employees where they are. And so while we certainly have access to a full health plan, we have access to IRA, retirement benefit, and a company match, not all of our employees are in a life position where those are the benefits that are the most directly impactful to their lives. They may not be able to think about retirement savings yet because they have more immediate day-to-day needs. It would be much more impactful for us to be creating benefits for that place that they are in their life. So instead of only having health care access for a very traditional, you know, PPO or HRA policy, we have also worked with our state association, which offers a completely digital online Teladoc app. We pay for that for every single employee in the building. It's very inexpensive for us, but it gives them wonderful 24-7, 365-day-a-year access to very basic healthcare, so that's been a huge win. We have a gift card program, so based on the number of hours that our employees work each month, they earn money towards getting a gift card. gift certificate code from us at the end of every month that they can use to purchase a gift certificate at Walmart for groceries, or Amazon for kids' birthday presents, or even a Visa gift card if that's the immediate need that they have. All employees, part-time and full-time, no matter the department, are earning PTO. Right away, on the first day of training, they are in some sort of an accrual plan with us. You know, we kind of brought into the open, so to speak, some benefits that a lot of small family businesses have offered their employees. but never really put pen to paper. We have an in-house loan program. So if an employee has a car repair that would prevent them from getting to work, they're unable to pay for it. It's a conversation with the two of us. And we're able to extend that loan to them. There's a repayment of an amount that works the most for them directly through their paycheck. We have a family meal program that we run all winter where our chef makes dinner for every single member of our staff and their immediate families once a week. So these are things that are just very directly impactful to our team that are really celebrated benefits of coming on board here.

Josiah: Incredible. You're showing us all what's possible when you care about people, when you're running a hospitality business with care. So thank you both for taking time to share that with you. I'll include links in the show notes. Is there any specific place you would point our listeners or people watching this to learn more about your hotel and what you're up to?

Amy: Sure. You can reach us on the Internet at SaratogaArms.com.

Josiah: Fantastic. We'll encourage everyone to check out your hotel and stay there if they can. Thank you both. This is a lot of fun.

Amy: Thank you. Thank you very much.