7 ways restaurants can stop driving away employees

Restaurants may inadvertently be working against themselves in the bruising struggle to find and keep employees, according to research firm TDn2K.

The company’s employment-focused arm, People Report, has identified recruitment and retention best practices by correlating its data on employment policies with the sales results collected by its financial benchmarking sister division, Black Box Intelligence. A number of personnel approaches were common among the sales overachievers. Yet when People Report recently surveyed restaurant employers for its annual report on the prevailing pay levels and benefit packages of the chain sector, it discovered considerable variances between what practices work in drawing and keeping employees, and what many employers are actually doing.

The wage and benefits survey revealed seven ways restaurants may be missing an opportunity. Here’s what operators can do to avoid them.

TDn2K intends to provide a deeper dive into its wage and benefits research during a webinar Aug. 15. Specific information on pay levels for various restaurant positions will provided in a special issue of Restaurant Business in October.

“The No. 1 reason people leave is to get a promotion somewhere else and get more money,” says Victor Fernandez, executive director of insights and knowledge for TDn2K. Obviously, he says, an internal promotion would provide that benefit to the employee while still keeping the team member in the fold. Yet restaurants as a whole are squandering the opportunity by giving less of an increase for promotions than they did a year ago. The typical bump in pay for someone promoted into a management position last year was 11%, TDn2K found in its salary and benefits survey. The mean for this year has dropped to 8%.

“If you’ve been waiting for that promotion and you get it, but the raise is smaller than you hoped, you may still go somewhere else,” says Fernandez.

An astoundingly low portion of the industry’s employers provide employees with a detailed statement of all their compensation, benefits included, says Jennifer Hubert, TDn2K’s director of analysis and resident expert on benefits.  “A large percentage of employees are still not getting it,” so they don’t appreciate that cash isn’t the sum total of what they’re getting, she explains. Many, for instance, don’t realize how much the company is paying for the individual’s healthcare coverage.

“The employer could easily tell an employee, ‘Even if we pay this percentage of your premium, this is what it adds up to be. When you’re thinking of moving to a new company, you have to take this number into consideration when considering which job is better,’” says Hubert.

“It’s a huge, huge opportunity,” she adds.

The strongest indicator of a restaurant chain’s success is the longevity of its general managers, says Fernandez. Yet, he notes, “If you account for inflation, general managers are making less today than they did two or three years ago.”

The reason, he said, is the surge in the cost of hourly labor. Minimum-wage hikes and mandated changes in benefits have largely been directed at improving the situation of hourly employees, and that’s left fewer dollars to reward GMs. Plus, bonuses have typically been predicated on top-line gains, and the industry is mired in a sales and traffic slump.

Restaurants aren’t racing to fix the problem, he suggests: Merit raises for managers average about 2.9%, or roughly the rate of inflation. The average increase for hourlies is 2.5%, according to the data.

The new hires who are most likely to succeed on the job and stick around longer are recruits who were referred by people already working there. No doubt, “The best source for quality hires is referrals,” says Fernandez. “This sounds like a no-brainer, where you see the results right away.” But about 25% of restaurant employers don’t offer a bonus for a successful referral, he says.

Sign-on bonuses are another way of drawing talent, he adds. TDn2K found in its research that 28% of the surveyed companies provide a sign-on bonus for multi-unit managers, and 20% offer that sweetener for new GMs. The percentages mark an increase from the prior year, he notes.

He adds that retention bonuses may be waning in use. About a third of restaurant employers currently offer them, according to the survey.

Bonuses have been harder to earn in the past year because they’re traditionally tied to sales, and same-store sales gains have not been robust. In response, some chains are rethinking what behavior to reward.

“All companies are doing a combination of sales and profits,” Fernandez says. “Underneath that, we’re seeing a lot of them, about 59%, are using quality [ratings] and customer service [scores] or a combination of the two, and about 38% are using an [employee] retention metric as one of the criteria for bonuses,” up from 21% in 2016.

TDn2K data leave no doubt that places investing in employees are reaping sales and profits in excess of what their stingier competitors are generating, according to Fernandez. But that’s not an easy case to make when the environment is far from robust. Companies tend to lapse into the safer stance of thinking they’ll put more money into wages and benefits when sales firm up.

“There’s definitely a feedback loop. Better sales give you more money for employees. But better employees will give you better sales,” says Fernandez. “You need to kick-start that cycle. You can’t say, ‘When our comps go up 3%, we’ll spend more on employees.’ You may never get there.”

And in the meantime, says Hubert, “We’re seeing those high performers having the money to spend. It’s compounding that competitive battle,” since the strong performers can offer more to employees, which makes them even stronger.

The perk that’s quickly proliferating in the restaurant industry is one that’s already become a standard of other rivals for entry-level employees: longer maternity leaves. Last year, that extra was omitted from the personnel policies for hourly workers of 94% of restaurant companies, according to TDn2K data. This year, the percentage dropped to 82%.

In general, says Hubert, “We’re seeing a lot of nontraditional leave.” Several states have broadened the situations in which leaves have to be provided to include time for helping family members kick drug and alcohol dependencies. Others have increased the times of parental leave, or mandated that employees be compensated with a portion of their pay while on leave.