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The Importance of Attracting and Retaining Restaurant Employees

Human Resources
Article
02/20/2018

The restaurant industry is notoriously volatile. In general, food service jobs are low-paid, entail shift work, and offer few benefits. The National Restaurant Association notes that more than 14 million people work in food service in the United States — and projects 16.3 million by 2027.

The food service industry has faced a barrage of challenges in recent years: 

  • States continue to raise the minimum wage, which most restaurants use for new staff. Eighteen states raised their minimum wages at the start of 2018, with many lifting it well above the federal rate of $7.25 an hour.
  • The national labor pool is shrinking, which means more competition with other industries for employees.
  • Fewer restaurants are competing for the same customers.
  • The number of independent restaurants dropped 4 percent in 2016.
  • Total U.S. food-service traffic is flat.
  • The turnover rate in the restaurant and accommodations sector rose to 72.9 percent in 2016, up from 56.4 percent in 2010.

The importance of attracting and retaining employees in any industry can't be overstated. But for the food service industry, a loyal team can mean the difference between success and failure.

Hire wisely, encourage loyalty

Restaurant employers must focus on effective retention techniques. Constant staff turnover can jeopardize any competitive advantages you have. In addition to raising wages, here are some ways that can help you hire better and keep staff longer:

  • Screen carefully during the recruitment phase — ask candidates questions that focus on behavior and "people skills," and conduct valid job-related, ability-based tests. Try to find out how well an individual might handle the stress of a food service environment.
  • Give new hires a thorough orientation and provide ongoing guidance, including customer service training.
  • Be fair with shift schedules and communicate the scheduling process.
  • Give employees some authority, allowing them to make low-level decisions on the spot, such as adjusting a bill. Immediate responses to customer complaints benefit both patrons and workers.
  • If feasible, offer incentives such as health insurance, tuition assistance, or gym memberships.
  • Provide team-building opportunities, encourage bonding, and show employees that the company values collaboration.

Financial advantages from worker retention

Employee retention yields financial benefits for restaurant owners and managers. One of which is the federal Work Opportunity Tax Credit (WOTC), which gives businesses incentives to hire and keep workers from certain groups, such as military veterans, food stamp recipients, and others with significant barriers to employment.

The Obama administration extended the WOTC through Dec. 31, 2019, giving businesses an ongoing tax incentive to employ the hard-to-hire. The U.S Department of Labor (DOL) notes that the WOTC for employers benefits all who participate and helps boost the nation's economic growth and productivity. The WOTC:

  • Reduces an employer's cost of doing business;
  • Can reduce an employer's federal income tax liability by as much as $9,600 per hire;
  • Does not limit the number of people a company can hire to qualify for the tax credit; and
  • Allows certain tax-exempt organizations to hire eligible veterans and receive a credit against the employer's share of Social Security taxes.

Employers that hire WOTC-eligible individuals generally receive a tax credit equal to 25 percent or 40 percent of a new worker's first-year wages, up to the maximum for the group to which he or she belongs. Your business earns 25 percent for hires who work at least 120 hours during the first year of employment, and 40 percent if they work at least 400 hours in that first year. The amount also depends on a new employee's target group.

It's not easy to run a successful eatery. Today's wage hikes, shrinking labor pool, and high staff turnover rates are among the challenges that can impact the odds of success. Smart hiring and employee retention strategies can help tip the scales in your favor.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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