Tips for Retaining Hourly Restaurant Employees

Intro

It is New Year's Eve and you have planned for your restaurant to do brisk business. You had mined the data provided by your demand and sales forecasting systems to expect heavy customer footfall, but when D-day does arrive and customers do throng your restaurant, you are not prepared to handle the rush. Customers quickly get impatient and start to go away dissatisfied, and even as fireworks light up the night sky to ring in the New Year, your business plunges into gloom and doom. What could you have done differently? After all, you did expect the year-end demand surge a long time back, didn't you? You also had an elaborate plan, beefed up by predictive analytics, in place to cash in on the opportunity. Why could you still not translate opportunity into revenue? The answer could lie in your failure to hold on to your best employees. You may have tried to bring in temporary cooks and servers to salvage the situation caused by the loss of a considerable number of employees in the run-up to the predicted big-sales event, but they were unable to compensate for the exit of your best workers.

Employee Turnover a Grim Reality

Retaining hourly employees is indeed a big challenge for all foodservice businesses. There are some staggering figures to prove this. According to the US Bureau of Labor Statistics data, as reported by Software Advice, TouchBistro, and others, the turnover rate of employees in the restaurant sector reached as high as 75% in 2019. The problem of turnover is particularly acute in fast food restaurants, in which more than 100% of the employees leave every year, according to a CNBC report. Turnover rate, in this regard, measures how often employees leave an organization. For instance, if the organization has 50 employees and a turnover rate of 50%, it implies that 25 employees have left. This is roughly similar to the concept of attrition, though in the case of turnover the organization looks to replace the outgoing employees, whereas when attrition occurs, the job position is usually deemed obsolete, and left vacant or done away with altogether. Fast food restaurants that depend to a large extent on the efficiency of the employees to provide speedy service and handle voluminous orders would be particularly worse off if their employee turnover rates are high. A career in a fine-dining restaurant, on the other hand, is usually considered to be a stable one. According to a survey by employee scheduling software provider 7Shifts, 47% of the restaurant businesses reported that they were adversely affected by employee turnover in 2019.

A Big Price to Pay

The monetary cost of employee turnover is substantial. This gets added to the labor costs of restaurants, which are already pretty high at 30-35% of revenue and makes up the biggest dollar outgo for restaurants. A study by the Center for Hospitality Research and Cornell University estimates the average cost of replacing just one employee in the hospitality industry to be $5,864. For a full-service restaurant, this has the potential to add up to $146,000 in terms of annual costs. Companies can ill afford to keep on hiring and training employees because it is going to be an extremely costly affair. A high turnover rate also paints the organization in poor light and dents its brand image. When you have a revolving door of workers, the business flow gets severely hampered. Employees who spend a considerable amount of time in the same organization together are well-versed with the unique needs of the business and understand each other very well too. A 7Shifts study found that for 76% of the restaurant employees, one of the best aspects of their job is their team members. This shows how crucial it is for an organization to retain its employees, and hold on to a team. A workforce high on coordination would ensure quality customer service. A restaurant that is unable to retain its staff often ends up understaffed. What happens is that the small number of employees that are there find it tough to manage the heavy flow of traffic and at the same time maintain a good enough service standard. When restaurant employees are overworked and fatigued, mistakes are common. In such a scenario, chefs may burn or undercook meals, and waiters may miss orders.

Why Employees Leave

Insufficient wages, paltry tips and benefits, improper scheduling, poor management, a stressful work environment and depressing company culture, overwhelming technology, long hours of work, lack of appreciation, and more lucrative jobs in other sectors have all contributed to organizations struggling to retain hourly employees. Software Advice reported that as of January 2018, merely eight of the 50 states in the US made it mandatory for organizations to pay their tipped staff the full state-mandated minimum wage. In the majority of US restaurants that paid their hourly employees much less than the official minimum wage, the employees were left to make up the shortfall in the form of tips. A study by the Economic Policy Institute and the University of California-Berkeley pointed out that the median hourly rate, including tips, that servers and bartenders earned in the US was $10.11. This wage was only $2.86 more than that prescribed at the federal level. Employee turnover is the lowest in those states that provide a higher minimum wage, a report by Upserve says. Five US states -- South Carolina, Tennessee, Mississippi, Louisiana, and Alabama -- had not implemented minimum wages for employees. Generally, states in the southern US were found to offer the lowest minimum wages. For instance, organizations in Alabama, Tennessee, Georgia, and some other states were required to pay their tipped employees merely $2.13 per hour. That's all. Poor management involves among other things, inefficient scheduling, placing some employees on long shifts, and some on short ones, denying shift-swap and time-off requests, or miscalculating weekly offs. The importance of scheduling flexibility can be gauged from a 7Shifts study that found 64% of the employees surveyed saying that one of the most attractive aspects of the job is schedule flexibility. Employees who are not allocated sufficient hours of work to earn a reasonable income or those who receive small hourly wages may be forced to work overtime. Studies have shown that working for more than 40 hours a week may lead to cognitive difficulties in workers. That is when mistakes become more common. It may also push employees to look for greener pastures. The US has seen a proliferation of restaurant ideas and cities like Nashville, Washington DC, and Minneapolis have become culinary centers in recent times. There has been a trend of rich and hungry entrepreneurs looking to launch their foodservice concepts, but the availability of workers has not increased at the same rate. Consequently, even average employees have had numerous places to move to in case of dissatisfaction with the present job. Restaurant turnover rates have also been high owing to the fact that foodservice businesses have been big employers of teenagers looking to cut their teeth in the job market. In fact, the US National Restaurant Association estimates that one-third of the teenagers engaged in work are employed in restaurants. These teenagers are usually those on summer breaks from school and are employed in low-paying entry-level jobs as cashiers, servers, or dishwashers. They have a low commitment to their jobs and leave when their schools reopen.

What then are the strategies to retain hourly employees?

Here's a list of what restaurants can do-

1. Pay well-

According to research by Software Advice, as many as 50% of the respondents said that higher hourly wages can help in retaining workers. Often the complaint of restaurant workers is that they are not able to sustain themselves on the wages paid. The Fair Labor Standards Act (FLSA) fixes the hourly wages for tipped employees at $7.25 at the federal level. This includes cash wages and tips. Tipped employees are ordinarily those who receive more than $30 in the form of tips every month, though this figure may vary, and Vermont, for instance, defines tipped employees as those receiving more than $120 in tips on a monthly basis. At one end of the spectrum are states like California and Massachusetts that pay hourly rates of $14-15, and at the other end are states like Texas, Idaho, Pennsylvania, Iowa, Indiana, Kentucky, and some others that pay just the FLSA-mandated minimum wage. In states like Kansas, Kentucky, Louisiana, Indiana, Mississippi, Nebraska, North Carolina, Georgia, Alabama, Texas, and some others, the cash wage paid is exactly the minimum wage that is fixed at the federal level-- a meager $2.13. It has been noted that paying employees more than the federally-fixed minimum wage can help organizations in retaining their hourly employees. This is borne out by examples on the ground. Fast-food behemoth McDonald's was able to reduce employee turnover and increase customer satisfaction by increasing wages by $1 over the minimum rate. By increasing the minimum wages of their employees, organizations can, in fact, derive even greater benefits than just saving the cost of new recruitment and training. According to a study by the Harvard Business School in 2017, wage increases tended to push the weaker performers out. Business owners, in this regard, can take advantage of technology to discover market rates for various job roles, and also ensure that payment is made accurately and on time. If an employee is not able to make the federally-mandated minimum wage even by putting together the cash wages and tips, the employer would be responsible to pay the difference. The FLSA allows a tip credit of $5.12 per hour, though the states of California, Alaska, Montana, Minnesota, Oregon, Nevada, and Washington do not allow tip credit. Employees in these seven states are, instead, allowed to earn only cash wages and tips. It is perhaps for this reason that the minimum cash wage in these states is already much higher than the overall minimum hourly wage (cash wages plus tips). Restaurant owners have also mulled over the idea of eliminating tipping because it is held to create dissensions between the tipped workers and the salaried personnel. The latter do the most critical tasks but often end up earning much less than the workers they are supposed to manage. Andrea Borgen Abdallah, who owns Barcito in Los Angeles, writes in an article for Medium that income from tips tends to fluctuate, and waiters tend to leave as soon as they realize that the restaurant has lost its sheen. The Juliet restaurant in Massachusetts also works on a no-tipping model but pays all employees (except the management) on the basis of a singular pay scale that is higher than the minimum wage rate, according to an Eater report. An alternative to no-tipping for increasing employee earnings is to use technology such as a point of sale (POS) solution for making customer experiences absolutely frictionless, which would raise the chances of both upselling and tipping employees.

2. Schedule staff well-

An employee schedule lays down the days and hours that employees are supposed to work, and also delineates the responsibilities of the employees. A work schedule helps everyone in the organization to have a clear understanding of the role and responsibilities of everyone else; it helps the employees in prioritizing the most time-sensitive and important tasks; helps them in managing deadlines better; and by allowing the reallocation of staff, it ensures that a restaurant is never understaffed or overstaffed so that revenues are safeguarded and labor costs are capped at a reasonable level. A schedule, in this regard, has to be employee-friendly and should adequately accommodate staff demands. Care should be taken while making schedules that every employee gets the chance on a rotational basis to work during peak hours so that they can make a higher amount in the form of tips. Furthermore, the same employees should not be placed on weekend shifts on a continuous basis. Using technology, employees can manage their shifts themselves, swap shifts with co-workers, and claim unoccupied shifts. This makes the employees happy by giving them a sense of empowerment. It also reduces the workload of the managers. By using technology like the Zip Schedules software solution, which can be accessed from the Hubworks app store, employees are able to view schedules as soon as they are published, from anywhere, and using any handheld device.

3. Provide adequate perks and career growth opportunities-

Competitive perks and benefits go a long way in retaining hourly employees. These can be provided in the form of paid time off, sick leaves, free meals, health insurance, childcare stipends, and bonuses paid in cash among other things. Organizations that allow employees to balance their work and family lives better are able to retain human resources better. A reasonable schedule ensures that employee engagement is increased. Although most restaurant workers look to grow their professional lives outside the restaurant industry, around 25% want to stay within the sector and move up, a 7Shifts report pointed out. Employees should be made aware of the career growth opportunities available within the organization and the course that they may take for career advancement. Along with that, providing regular training would convince the employees that the management cares about their professional growth, and this would make the employees loyal to the organization. According to a study by Black Box Intelligence, organizations that devoted four or more hours to employee orientation witnessed a 13-point fall in turnover rates. Also, organizations that spent 5% of their budgets or more than that to train certified trainers saw a 23% reduction in turnover rates.

4. Revamping hiring and onboarding processes-

Recruitment of new employees should be based on the values and vision of the organization, and not just the experience of the applicants. For instance, a restaurant may emphasize that customer service should never fall in standard, for another restaurant food safety may come first even at the cost of revenue, while still others may focus on producing the most delicious and unique menu items. It would be good to see during the interview itself whether the applicant fits into the restaurant's vision. Employees who share the core values of the organization would be easy to retain. Also, recruiters have to make sure that they ask questions that are in keeping with the present working conditions at the restaurant. Applicants should have clarity at the stage of the interview itself on the roles and responsibilities, compensation, perks, prospects for career advancement, and so on.

5. Offer a job referral program-

This would ensure a steady inflow of talent, and do away with the need for organizations to desperately search for people to fill job vacancies. Desperation to recruit may lead to bad hires. On the contrary, current team members know the requirements of a business very well and are expected to refer only those who would fit into the company's scheme of things. When the referrals are linked to incentives, either in the form of money, vacation, or shift preference employees are expected to take the referral program very seriously. In the first place, only employees who are happy with their jobs would refer others, and among them, those who are particularly loyal to the company would take the trouble to find the best candidates who could help the company in growing its business. Seeing familiar faces at work makes employees comfortable, and helps them in getting jobs done quicker. So successful job referrals increase employee efficiency and the company ultimately stands to benefit. Moreover, successful job referrals also give employees a feeling that the company values their opinion. Also, having brought his/her friends in, an employee may not be keen to immediately leave the job. Therefore, it has been seen that employees making successful job referrals tend to stay longer at an organization, a LinkedIn report says. Job referrals have positive effects on the referred candidates too. According to a JobVite study, it is possible to recruit a referred candidate in 29 days, as opposed to 39 days for a candidate coming through job postings, and 55 days for a candidate hired through a job website. An organization sourcing candidates through internal job referrals can also save a lot of money in the form of job board advertisements, agency fees, and so on. Therefore, it is also cheaper to recruit referred candidates, and they can be onboarded faster too, according to Meritage Talent Solutions founder Kara Yarnot's research, mentioned by a LinkedIn report. Furthermore, JobVite points out that referred candidates are easier to retain, and 46% stay in a company for over a year, 45% stay for more than two years, and 47% stay for more than three years.

6. Streamline onboarding-

According to a study by the Brandon Hall Group, businesses that have a robust onboarding process see the retention of new recruits increasing by a whopping 82% and productivity rising by more than 70%. It is indeed extremely important to sensitize every new recruit about the company rules, policies, expectations, targets, and dos and don'ts right from the very beginning so that they do not have problems later. An employee handbook would provide useful information to the new hires, and experienced members of the team can be asked to mentor the new recruits. An organization may also have digital resources to orient and onboard new employees in a smooth way. ServSafe, which is the US National Restaurant Association's food safety training and certification scheme, can be utilized to train new hires in safe food preparation and handling.

7. Recognize good work-

Everybody wants a pat on the back for doing good work, and when incentives, promotions, and wage hikes are linked to performance, employees have all the more reasons to give their best. Recognition of work in public makes the employees feel valued in the workplace and boosts employee morale and engagement. An engaged employee is also a loyal employee and is easier to retain.

8. Seek employee feedback-

Talking to the employees both one-on-one and as part of teams, seeking their feedback, and trying to solve their issues and dispel their fears would give employees the belief that their company cares for them. Good managers are those who can pre-empt employee issues and find solutions to them before they become unmanageable and the employees leave. When an organization takes good care of its employees, it can perhaps raise the Key Performance Indicators (KPI) a bit without the employees turning rebellious and eager to leave.

9. Adopt easy-to-use technology-

Clunky technology can invariably put employees off. Research by 7Shifts shows that for 28% of the employees surveyed, poor workplace technology is one of the least alluring parts of the job. An organization has to remember that not every employee is tech-savvy, and when the technology it uses is difficult to handle and slows down operations, employees would soon lose patience. A well-functioning software solution, on the other hand, would provide a lot of benefits and ensure that the employees have an enjoyable experience. For instance, a smart POS system would update stocks automatically and in real-time so that inventory management is made robust and the employees do not have to go through manual stock-taking, which can be extremely tedious, and boring. Furthermore, a POS system connected to a kitchen display system ensures that the orders are visible to the kitchen staff as soon as they are recorded in the POS system. Once that happens, the kitchen staff can quickly get down to the business of preparing meals. This would be particularly beneficial to quick-service restaurants whose USP revolves around the ability to serve customers quickly.

10. Strengthen workplace culture-

This can be done by building team bonding through after-hours events, parties, family meals, and so on. Employees who treat their organization as their family are less likely to leave. A manager who is sympathetic yet strict would command the greatest respect from the employees and often the decision of the employees on whether to stay or leave depends on how their experience with their reporting managers has been. Company rules regarding employee clock-in and clock-out times and KPIs should be impartially implemented across the board, while genuine difficulties that the employees may face should not be ignored.

11. Undertake exit interviews-

According to research by Software Advice, 90% of the exiting employees reported that they did not have an exit interview. Ignoring exit interviews would mean that the organization would not be able to discover what has been causing employee dissatisfaction, and the ways to reduce turnover. Also, without exit interviews, an organization would not know what benefits a competitor is offering that is luring away its employees. Therefore, exit interviews must always be conducted even if the employees who had made up their minds to leave cannot be retained. Questions like 'What is the main reason for you to leave?', 'What was it that you liked the most here?', 'What suggestions do you have for us?', and so on can help in providing valuable information that can be used to woo and retain employees in the future. Significantly, the study by Software Advice also found that 35% of the respondents were willing to stay back in their companies if the necessary employee-friendly changes were made. Forty percent of the respondents said they may consider staying back. This shows that organizations can salvage the situation and reduce employee turnover rates by effecting employee-centric meaningful changes.