Wage Rate Impact on Employee Performance: A Restaurant Industry Study

This report investigates the correlation between wage rates and employee performance within the restaurant industry, using a case study in Denmark. It explores how wage levels influence employee motivation, productivity, and overall job satisfaction. The research delves into the impact of wage policies on employee turnover and organizational goals, examining both positive and negative effects. The report includes a literature review on the impact of wage rates on employee performance, productivity, and strategies to increase employee production. Furthermore, it highlights the importance of fair wage practices and provides insights into wage policies and their potential threats, offering valuable information for organizations seeking to improve employee retention and enhance performance. The methodology section outlines the research approach, and the report concludes with an analysis of findings and recommendations for the Cut and Eat restaurant to address employee turnover and enhance overall performance.

Impact of Wages rate of
Employees in Restaurant
industries and Their Work
Performance- “A case Study
in Denmark

Table of Contents
INTRODUCTION.......................................................................................................................................3
Background information..........................................................................................................................3
Aim..........................................................................................................................................................5
Objectives................................................................................................................................................5
Significance.............................................................................................................................................5
Problem statement...................................................................................................................................5
Structure of report....................................................................................................................................6
LITERATURE REVIEW............................................................................................................................6
Impact of wage rate on performance of employees.................................................................................6
Impact of wage rate on Employees productivity......................................................................................8
Negative impact associated with wage policy for organizations............................................................11
Strategies to increase employee production...........................................................................................12
RESEARCH METHODOLOGY..............................................................................................................14
REFERENCES..........................................................................................................................................17

INTRODUCTION
Background information
The wage rate is basically the amount of base wage which is being paid to the workers
and employees per unit time or per unit output. The wage rate plays an imperative role within the
organization and thus it varies from organization to organization. In the nutshell, wage rate is
primarily money which is mainly paid to worker on the basis of time period worked by them or
total output produced by them for the company. This output is basically measured by the
efficiency of employees and thus affects their overall performance and productivity (Bradley,
Postel-Vinay and Turon, 2017). Wage rate talking of the overall industry impacts the satisfaction
and motivational level of employees to the great extent. Wage rate has direct correlation with
both productivity and performance of employees and therefore have a great contribution in
attainment of the organizational goals as well as objectives along with fulfillment of the
individual goals. Employees form the core strength of each and every organization and thus are
considered as main asset of the organization. The success of each and every company whether
small or big is generally determined by the way in which employees does their work. Employees
who remain motivated as well as satisfied from their work then this helps the organization to
achieve their goals as the highly committed employees strive willingly to perform their best and
thus works harder for organization. On the other hand, when employees remain under great
pressure as well as are not satisfied with their organization then this dissatisfied employees
become threat to the organization. The demotivated employees do not work effectively which
affect company in negative way. This main route to the motivation and satisfaction of employees
is the wage rate. Wage rate decided the productivity as well as performance of employees. It is
highly essential for the organizations to decide the minimum wage rate for their employees as
this influences the overall working of employees. Therefore, for inculcating a sense of
motivation among employees and increase their overall performance organizations should ensure
that every worker and employee receive equal pay for their work. Employees remain happy as
well as satisfied with their organization when they realize that their organization and
management provides the fair wages according to the amount of work done by them. The
organization should provide fair and equal wages to their employees who are performing the job

of same nature and thus have similar responsibilities. It is highly obvious that every worker
works for providing his or her family a better living and appropriate standard of living thus when
organization will not provide proper and equal wages to their employees then this will lead to
decrease in motivational level and will affect the turnover rate of corporation. In this way, wage
rate plays a great role within the employee productivity as well as their performance. The
performance and productivity of the employees are generally measured by the amount of output
which they generate and to what extent they contribute towards achievement of organizational
goals and objectives. Wage rate mainly stimulates productivity and performance of employees in
some or the other way. For example- when the organization or enterprise sets an equal pay
structure of their workers and thus provides timely disbursement of their wages then a sense of
commitment as well as trust is generated within the workers for management and thus they
endeavors to give their best in order to achieve their individual as well as organizational goals. In
addition to this, when organizations mainly offers the unexpected rise in the wage rate of the
employees then the employees are more likely to become committed as well as enthusiastic
towards their work and thus work hard for achieving this great rise in pay. When a greed emerge
within the employees to attain this high rise being set by the organization then they work hard
and this eventually enhances their overall productivity. Thus, in this way wage rate is one of the
major motivating factor which helps to increase the productivity of employees. On the other
hand, when organization exercises inequality and remains unfair in disbursing the wages to their
workers then a sense of frustration and anger is filled within workers which results in their
decreased performance as they do not strive to give their best for organization treating them
unfairly. Like for example if organizations will provide unequal minimum wages to their
employees as well as do not provide any hike within the wages then there remains no
motivational factor for employees to work for organization and thus their performance
automatically declines. In order to ensure the fairly disbursement of the wages to the employees,
the most effective legislation is wage rate policy. This is the legislation as well as action taken by
government for ensuring that each and every employees is equally paid for their work and hence
are not discriminated on basis of their colour, sex etc. The main aim of this policy is to ensure
economic as well as social well being of the employees. Although this is one of the most
effective policy for providing security to the employees, there are various threats in this policy
which affects employees as well as organization as a whole.

This report will basically throw the light on impact of the wage rate upon performance of
the employees in Cut and Eat restaurant. This restaurant is mainly facing the problem of
employee turnover as well as high attrition due to its minimum wages which are given to the
employees. This report will show the importance of wage rate on productivity of the employees
to Cut and eat restaurant.
Aim
To find out how the wage rate will affect work performance of the employees.
Objectives
To determine whether wages rate affect work performance of employees.
To analyze how wage rate can be connected for employee productivity
To critically analyze possible threats due to wage policy
Significance
The main importance of this research is that it will assist the large number of
organizations as well as researcher in carrying out the study on similar topic. Firstly, this report
will assist the organizations to know how the wage is directly linked with employee performance
and will also assist them to know that on what basis the wage needs to be provided to different
types of workers like part-time, full-time workers etc (Hirsch and Valadez, 2017). Besides this,
the another major significance of carrying out this study is that it will help the organizations to
design various strategies as well as tactics for retaining the employees and thus motivate the
employees to high extent. Secondly, this research study will also help the large number of
researchers for carrying out similar study. This research will act as the treasure of information to
them where they can extract essential information as well as will get the evidence supporting the
study. This will provide a great raw information to the researchers.
Problem statement
The issue of the impact of wage on employees is a huge concern which is being faced by
various organizations as well as employees nowadays. Today, each and every employee requires
a great amount of pay through which they can lead a luxurious life. This high wage also
increases the motivational and satisfaction level of employees and thus has a direct relation with

wage rate. But nowadays, organizations have failed to understand this direct relation and thus
face the problem in setting the wage rate which will increase the productivity and performance of
employees. Thus, this is the major problem which is being faced by large number of
organizations (Prowse and Fells, 2016).
Structure of report
This research will mainly consist of six chapters. First chapter will consist of introduction
and overview of the topic. Second chapter will cover literature review. Third chapter will consist
of research methodology. Fourth and fifth chapter will cover data analysis and decision and
result. Sixth which is last chapter will consist of conclusion (Chapman and Thompson, 2017).
LITERATURE REVIEW
Impact of wage rate on performance of employees
As per the view of Pailhé and Solaz (2019), The wage rate has a great role to play in the
performance as well as productivity of employees. Wage rate is basically amount of the base
wage which is being paid to the worker per unit time. The wage rate is not only measured in
terms of time but also the output unit which the employees produce trough their work. The wage
rate is directly linked to the performance of employees and thus is considered as the major
determining factor for their productivity and overall performance. This affects it both negative
and positive way.
According to Dube, Lester and Reich (2016), The major purpose of being an employee
within the organization whether small or big is to earn the income in form of wages or the
compensation. Wages forms the important element which helps to fulfill the basic necessities of
employees like food, clothing, housing etc. Each and every organization set the amount of wages
for their employees and this varies company to company. On the other hand, the performance of
employees is generally measured the amount of output produced by them through their job and
thus this is the activity which is highly crucial for organization. The performance level of mainly
used as the measure of success of organization. The factors which are being used for
measurement of the employee productivity involve work quantity, quality of the work as well as
timeliness. The performance of employees is highly influenced by the amount of wages given by

organizations to the employees. For example- when organizations provide equal wages to the
employees who are engaged in same nature of the job and having similar responsibilities then
this eventually increases the motivational level of employees. Thus, this increased motivational
level and enthusiasm of the employees towards their work eventually increases their overall
performance. This is because as organizations pays equal and timely wages to the employees
then this increases the confidence and trust of employees towards the organization and thus they
become highly committed towards their work and strive willingly to achieve the organizational
goals. On the other hand, when organizations does not timely disburse the wages to their
employees as well as does not equally pay to their employees for the same nature of duty and
similar responsibility then this eventually decreases the motivation level of employees.
According to Chava, Danis and Hsu (2017), A sense of frustration and anger develops
within the employees towards their employer as well as management of the organization. This
often leads to the decrease in performance of the employees. This is because when there occurs
the difference in payment of wages to each and every employee then the employees lose trust on
organization as well as their enthusiasm towards work decreases. This certainly leads to the
decrease in their performance level as well as overall productivity. Thus, in this way wage rate
has a very important role to play in the quality of life which the employees leads and thus
contributes to the high extent towards their work. The wage rate is all about the amount of
money which is given by the organizations to their employees so that they can lead a better life.
This decrease in employee performance due to ineffective wage rate also impact the success of
organization.
As per the view of Card, Lemieux and Riddell (2018),When the employees will not work
productively or will not intentionally strive for fulfilling the goals and objectives of organization
then this will eventually affect its position in market as employees forms the core strength of
each and every organization. On the other side of the spectrum, when employees will get better
and high wage in order to access basic necessities then this will eventually increase their
satisfaction level and along with this, employees will remain happy with the organization. This
will ultimately affect the success of organization in positive way as employees will work will
high commitment to provide better services to the customers and happy customers will at the end
helps the organization to achieve competitive advantage.

According to Vom Berge and Frings, (2019), Thus, in this way wage rate affects the
performance of the employees to a great extent. The issue of wages has become a great problem
within the hospitality industry not in the terms of what wage rate needs to fix for the employees
but in the terms that how to retain the employees. The organizations hire various types of
employees. Some candidates join the organization on time internship basis, some employees
work as part-time while some of the workers works on full-time basis. It is highly essential for
the employees to retain the part-time and full-time workers as well as turn the interns into
employees. This is only possible when they perceive the organizational culture has highly
imperative as well as beneficial. For example- when the interns who works for the organization
for fixed period of time on apprenticeship basis when perceive that the wages given to the
employees as well as interns are fair and justifiable according to their work then their
performance towards eventually increases.
As per view of Englmaier, Kolaska and Leider, (2016), On the other hand, when the full-
time workers finds out that the wages given to them by the organization is equal to part-time
worker even though they are working for long period of time as well as complex responsibilities
then their performance eventually decreases. Their trust and confidence on the organization
reduces and this ultimately results in the drop of their performance. The equal and fair wages
when given to employees increases their overall satisfaction as well as motivational level and
thus their productivity eventually increases. Along with this, when full-time workers finds out
that they are receiving the wages equal to the part-time workers then their commitment towards
the work increases and they feel valued. They perceive that organization places a great value on
their needs and expectation and thus they does their work with greater enthusiasm and
commitment. This at the end increases the performance level of the employees.
Impact of wage rate on Employees productivity
According to Carbonnier and et.al.,(2019), Wage rate also plays a great role in the
productivity of employees and is directly linked to it. Employee productivity is primarily
assessment and analysis of the efficiency of worker and is generally evaluated in terms of output
generated by them within a specific time frame. The output is associated with the organizational
success as more the productivity, higher will be the goodwill of company in market. The
employee productivity is highly linked and have a direct impact upon the productivity of

employees. The wage rate not only enhances the necessities of living but also increase the
satisfaction level of the employees. The productivity of the employees is generally measured in
terms of the output generated by them thus higher output means higher productivity. When
output of the employees increases then their contribution towards the firm revenue also increases
and this in turn increases the demand of the workers. This idea of the productivity is generally
partitioned within two divisions which are individual productivity as well as organizational
productivity.
As per the view of Strömberg and et.al.,(2017), The individual dimension is mainly
related with characteristics of personal qualities of individual and thus shows mental attitude and
personal satisfaction of employees. Organizational dimensions on the other hand looks for the
productivity within system and examines relation between input and output. The received wages
are generally used by the employees for fulfilling their needs as well as demands and thus
become the great factor for increasing their own satisfaction level. This concept of wage rate
reveals its importance to the productivity for employees and the way in which they lead their life.
The measurement of employee productivity shows that wages as well as performance and
productivity of employees has positive correlation and thus affects their overall quality of life.
The minimum wage rate set by the organizations helps the employees to understand that what are
goals and objectives of the organization and what is expected from them in terms of quality and
quantity.
According to Burauel and et.al.,(2020), The human productivity has great role for
determining success of organization. This productivity is not only measured in terms of the
outcome which is generated through them but also their attitude as well as mental well-being.
Wage rate basically appears as reward or appreciation to the employees which seems to be really
affecting their overall productivity as well as performance. When employee receives the rewards
as well as benefits then this increases their motivational level as well as their satisfaction level
and thus their overall commitment towards the work increases. The productivity of the
employees also helps the organization to gain an edge over their competitors as well as achieve
competitive advantage. Each and every position within the organization has different wage rate
as well as base pay. The various departments of the organizations have different functions to
perform and thus management sets different wage rate for these departments. These wages

mainly depends on the complexity of the work as well as efforts which employees put in it. Thus,
when employees do the complex job then they expect a fair and great wage for fulfilling their
dreams.
According to Carr and et.al.,(2019), The wage rate is highly influenced by the type of
workers which works within the organization. Organizations consists of various kinds of workers
like part-time workers, full-time, apprentice etc. Organization has to set the wage rate for each
and every kind of workers in order to retain them. An employee only tends to stay within the
organization when they find that organization is fair with them in terms of various aspects like
wages, culture etc. Organizations have to set the wage rate according to their responsibility as
well as the time for which they are working. These wage rates affects the productivity of the
employees to a great extent. When all the workers gets the wages according to their work then
this overall increases their output level and thus their productivity increases. Wage rate is
directly connected with the efficiency of the workers thus when their efficiency increases,
productivity ultimately raises. Along with this, wages also increases the mental wellbeing of
employees. They feel satisfied when organization treats them fairly and does not discriminate
according to their age, sex, colour etc. This at the end raises the productivity level of employees.
Besides this, the output of the employees raises when they finds out that organization put
continuous efforts for rewarding them and appraising them. When organization continuously
works on the wage of their employees and put high efforts for raising it frequently according to
the working performance of employees then their productivity and output level ultimately
increases. Thus, wage rate plays a great role and is highly essential for the personal development
of employees. Wage rates fixed by the organizations for different types of employees have a
great impact on their mind and this also increases their overall knowledge base. This increase in
the knowledge base of the employees becomes a great contribution towards their productivity
and thus affects them positively. The wage rate and employee productivity has the direct relation
and increasing the wage rate, increases the productivity of the employees. Thus, in the end it has
been found that it is highly crucial and essential for the organizations to give an utmost
importance to the wage rate as this will help them to retain the employees for long period of
time.

Negative impact associated with wage policy for organizations
According to the view of Sorensen and et al., (2019) there are various kinds of negative
impacts or threats that are associated with wages policy. One of the aspect of wages policy i.e.
minimum wages policy highly affect restaurant industry in many different ways. It is one of the
threat or negative aspect for restaurant industry because restaurant industry is one such industry
which is affected by market in which price competition is extremely high because of which
overall revenue and profitability of the restaurant is affected. If there is rise in minimum wage
policy and competition in the market also increases because of which they will be forced to
reduce their overall price or provide discount to their employees then it will affect their overall
profitability and revenue of the organization. Sorensen and et al., (2019) further explains that,
Wages policy forces an organization to pay minimum amount of wages to their employees
regardless of the fact that whether the organization is performing well or not affects overall
organization in many. Restaurant industry is one such industry that get affected by this wage
policy.
As per the view of Scicchitano, Biagetti and Chirumbolo, (2020) there is union wage
policy which is based on a principle of fair day pay for fair day’s work. It is one of the most
beneficial policy for employees but is a threat for organizations as this policy says that wages are
attached to jobs rather than an individual’s attributes or capability. It is important for
organizations to pay appropriate wages to their employees as per their job or designation
regardless of the fact that attributes of an individual might not be suitable for the wages that are
being paid to them. Wage policy has been designed in such a manner that it helps in reducing
any kind of discrimination associated with the wages as well as also helps in reducing wages
differentials. Scicchitano, Biagetti and Chirumbolo, (2020) further explains that, Many times, in
order to reduce this difference and each worker gets benefit of this wage policy, union of
workers is made within an organization so that all the workers or employees get appropriate and
desired amount of wages. Many times, this union of workers becomes a threat for organizations
if they do not focus on wages that are being paid to the workers.
As cited by Huffman, King and Reichelt, (2017) explains that, restaurants need to focus
on bringing changes within their pricing strategies as well as within their employment as well
because increase or decrease in minimum wages also affect overall operations of the

organization. It is a threat for organizations because hospitality industry is one such industry in
which more than 25 percent of workers or employees are paid below minimum wages and if any
organization found doing such negative practise then it can impact their organization in many
different ways. This is because laws or legislations associated with wages are quite strict.
Huffman, King and Reichelt, (2017) also explains that, Policy makes need to understand all the
legislation associated with minimum wages or appropriate amount of wages that are required to
be paid to the employees. Not only this they also need to understand its impact on different level
of the employees so that overall operations of the organization are not affected.
According to the view of Bhorat, Kanbur and Stanwix, (2017), food and beverage industry need
to focus on these policies because changes in minimum wages impact different levels of
organizations that can either increase or decrease their overall business. Restaurants need to
bring within their pricing strategy as well as within their employment. Business owners of the
restaurant might accept small changes within minimum changes but id there is requirement of
large medications or changes then it can become a threat for organization as well as for other
main operations of the restaurant. Policy makes need to continuously work on understanding and
analysing effect of changes in wages policies and their impact on different level of business as
sell as workers. This analysis can help policy makers to determine minimum level of wages as
compared to overall operational cost, revenue generated and overall profitability earned by the
organization. Bhorat, Kanbur and Stanwix, (2017), further recommends that Organizations
should also be prepared if minimum wages or wages per day rate is increased drastically then
what impact would have on business and ways in which they would reduce its effect on business.
Strategies to increase employee production
As per the view of Bender and et.al., (2018.), the concept of employee engagement which is the
sustainable body of theory which have the empirical level of evidence in order to have
motivations and productivity. In addition to that, employee engagements are considered to be
paramount business circle which bring positive level of outcomes for the organization. On the
other hand, the Maestas, Mullen and Powell, (2016) contradict that, there is major level of
relationship of the employee in organization which have been materialized with major
withdrawal behaviors along with commitment.