The industry has been volatile the past year and a half — to say the least. And while things seem to be on the upswing, the industry is now facing another big hurdle: labor challenges and shortages. BLS reported that job openings reached a record high of 9.3 million in April, and the accommodations and food services sector accounted for the largest increases.
What’s driving the restaurant staffing shortage? Experts attribute it to a number of causes:
- Lack of childcare. Many daycares are short-staffed, and workers with children are unable to rejoin the workforce because of a lack of childcare options.
- Opportunities in other sectors. When restaurants closed early in the pandemic, many workers turned to other sectors that were thriving, such as warehousing and logistics.
- Safety concerns. The nature of the restaurant environment makes it easy to transmit illness. On-premise diners can’t wear masks, and many workers simply don’t feel safe coming to work.
- A competitive hiring landscape. With fewer workers on the market, service businesses of all kinds are competing for a smaller talent pool. Many are offering better compensation packages and unique incentives to attract employees.
- Unemployment benefits. Some experts pointed to enhanced unemployment benefits as a deterrent for employees returning to work, although recent evidence shows that cutting those benefits doesn’t significantly reduce the labor shortage.
The trickle-down impacts of the labor shortage
To overcome these issues, recruiters are getting creative, offering perks ranging from interview bonuses to competitive benefits. The shift to digital communications has also changed the way businesses recruit, making social media, online job boards and employer branding more important than ever. They’re also raising pay and adding benefits to their compensation packages.
Restaurant labor costs are rising
Restaurant labor costs are on the rise, adding additional stress to the bottom line, on top of supply chain issues and rising food costs. The cost of restaurant and service industry labor in 2021 is accelerating rapidly. As of May 2021, limited-service crew wages increased 7.5% year over year, and full-service line cook wages increased 5.3% according to Black Box Workforce Intelligence™.
How does your employment offering stack up against your competitors? Check out Black Box Workforce Intelligence™ for access to robust restaurant employee data covering 2.4 million employees benchmarked against your competitors.
To reduce labor costs, operators that can’t offer higher wages are offering other incentives and perks, such as free food. Technology like self-service kiosks can also offset labor costs, but they require an upfront investment. In order to determine which investments make the most sense for your business, it’s important to have a solid formula for calculating your labor costs and understanding them in the context of your broader financial picture.
In addition to tallying your total expenses spent on wages and salaries, overtime, payroll taxes, health care, paid time off and bonuses, you also need to calculate how much your gross sales revenue goes towards those costs. This is called your labor cost percentage.
Server’s wages vs. minimum wage and the potential policy impact
Depending on the state’s minimum tipped wage, servers may make as little as $2.13 an hour. However, the current debate around raising the minimum wage to $15 may change that. Both servers and operators have mixed feelings about the potential change. For business owners, raising the minimum wage can cut into already thin margins. Employees worry that it will lower their take-home pay at venues where customers typically tip generously.
Labor Costs FAQs
What is the average server's hourly wage and salary?
The median server’s wage in the U.S. is $11.42 an hour.
What is the U.S. federal minimum wage?
The current federal minimum wage is $7.25 per hour.
How does unemployment pay work?
Unemployment policies vary by state. In some places, the state factors in tipped wages in their calculation of how much unemployment you’re owed.
What percentage should labor costs be in a restaurant?
Generally, labor should account for 30% of a restaurant’s revenue.
How to calculate labor cost percentage in a restaurant?
To calculate your labor cost percentage, you need to take your total dollars spent on wages plus compensation and divide them by your gross sales for a certain time period.
To understand how your wages and labor costs compare to your competitors, both locally and by restaurant type, download our guide to restaurant benchmarking.
How high turnover adds to labor stress
Restaurants aren’t just struggling with attracting new employees. Turnover, which has always been a source of frustration for the industry, is complicating the staffing issue. Restaurant employees are leaving the industry for other opportunities, with many concerned about safety or no longer wanting to deal with the frustrations of dealing with hungry customers.
How to reduce the hourly turnover rate at restaurants
To keep employees from leaving for other industries, or out of frustration, consider these methods to reduce employee turnover. To reduce hourly employee churn, implement training programs that make them feel prepared for work, demonstrate that you’re serious about following COVID-19 guidance and offer compensation and incentives to make your business more competitive.
To reduce manager turnover rates at restaurants, it’s important to make them feel comfortable about the safety of the workplace as well. And since the quality of your managers has a direct impact on employee turnover, it’s also important to make sure they’re engaged. Offer growth opportunities, recognition and development training.
Understanding your turnover rates will help you establish the right employee retention strategy, just as knowing your labor costs will help you set your recruitment strategy. Use this Restaurant Turnover Rate Calculator to understand your costs.
The state of staffing and recruiting
Restaurant staffing is in a serious crunch due to a number of factors, from competition with higher-paying industries to employee safety concerns, to turnover. So, what can you do to recruit successfully? For starters, implement new and creative strategies to attract candidates. It’s a competitive market for talent, and your employer branding is critical to standing out.
One way to stand out is with your social content. Many of your employees are already posting content on social media while at work. Seek out the best of that content and promote it on your social channels. You should also look at potential employees as an audience that’s giving you cues as to what they want. The restaurant workforce is sending a message, and it’s important that we listen. From better compensation to management improvements, attracting the best employees will rely on how well you respond.
Examine what your employer message conveys and whether it needs to be refreshed in light of the pandemic. Much of the current discourse around restaurant worker shortages is adversarial. Many workers are resentful of leadership, due to what they perceive as unfair compensation and subpar working conditions. Operators should consider adapting their messaging in acknowledgment of those issues.
Staffing and recruiting FAQs
What is the average years of experience for restaurant industry roles?
Food service managers have an average of less than five years of industry experience.
What is the expected pay?
While it’s hard to gauge what employees expect to be paid from state to state, McDonald’s estimate may very well become the standard. The chain says it expects to pay employees $15 per hour by 2024.
How important is staffing in a restaurant?
Staffing is vital to any restaurant’s operations. Establishing the right staffing levels is key to delivering the level of service your customers expect in terms of service quality, speed and overall convenience. Too little staff, and you can’t meet their expectations. But hiring too many people can hurt the bottom line.
How to handle short staffing in a restaurant?
To deal with short staffing, you need a multi-pronged approach. Investing in technology can fill gaps created by a shortage of workers. It can also make work easier for employees, enabling you to attract and retain more workers.
What kind of recruiting is being used by restaurants?
Restaurants are getting creative and expanding their recruiting efforts, particularly in the digital sector. From social media to online advertising, the most successful recruiters are reaching candidates with messages that resonate on the platforms they use the most.
To understand how shifting employee perception, along with changes in the industry as a whole, can impact your staffing and recruiting strategy, download our 2021 Guide: 14 Things for Restaurants to Watch.
How COVID-19 will impact restaurant recruiting long-term
While it’s hard to know just how much the pandemic will impact the restaurant industry, it’s clear that the competition – for employees and customers – will continue to be stiff. In many ways, COVID-19 brought labor issues to the forefront and exacerbated some existing employee frustrations with the food service industry. When restaurants closed and many workers were forced to find work elsewhere, some have found that they prefer the compensation, stability and safety of other industries.
So, how will restaurants be affected by COVID-19 long-term? For starters, the industry will need to adapt to be more competitive and attractive to employees who have other options to choose from. Embracing technology can also relieve some of the burdens of the labor shortage and help meet consumer demand for convenience and off-premise dining.
And on another note, many workers are struggling with mental health. Operators would do well to implement programs that focus on employee wellbeing. The industry has long had a reputation for substance abuse among its workers, which intensified during the pandemic. Some restaurants are changing operating hours to ease employee stress, and many workers are forming their own support groups.
To get a better understanding of how to assess your restaurant’s performance in the wake of COVID-19, download this guide to understanding your data.
The restaurant labor shortage has been an unexpected curveball in an already unprecedented crisis. However, there is hope for restaurants that can continue to pivot to meet changing employee expectations. Staying on top of the latest insights from industry experts empowers you to adapt through the recovery. Sign up for the Restaurant Industry Performance Pulse to get all the latest restaurant news and information in your inbox.