How to Find Room in the Budget for Employee Benefits

Learn how real restaurants are finding ways to offer employee benefits that keep their staff around longer.

The cost of healthcare is a top concern for U.S. citizens. And more than half of Americans under the age of 65 – about 158 million people – get their health insurance through an employer. Unfortunately, that figure is much lower for restaurant workers: A survey by Restaurant Opportunities Centers United found that almost nine out of ten people who work in the restaurant industry lack paid sick days (87.7%) and health insurance from their employer (89.7%). The study added, “As a result of the fact that those who work in the industry cannot afford to take care of themselves or stay home when they are sick, two-thirds of them (63.6%) report working sick, unnecessarily placing co-workers and diners at risk.”

As workers across many industries lay on the pressure for both employers and public policy makers to introduce reforms to a healthcare system that’s literally making people sick, some businesses are creating employee benefit programs that provide quality healthcare options for the very people who allow the businesses to thrive. These forward-thinking business leaders are setting a new standard for a healthy, sustainable restaurant workforce. Read on to learn about the restaurateurs who are raising the bar by offering employee benefits that turn restaurant work into viable, long-term career paths for their staff.

Employee Benefits are a Necessity

The restaurant industry has a staff retention problem.

Although there are a variety of contributing factors to employee turnover in the restaurant sector, high on the list is the lack of emphasis on personal and professional wellbeing. Late hours, double shifts, tough work–life integration, and unpredictable income leave restaurant workers more stressed than those in most other industries.

Alleviating stressors outside the workplace — whether that’s worrying about career longevity or how to pay for medical bills — reduces distractions for your employees, helping them feel more secure in their jobs and maintain laser focus on delivering memorable dining experiences for every guest when they’re out on the floor or on the line.

Restaurant workers earn some of the lowest wages in the country. Providing your staff with meaningful employee benefits, like paid time off and medical insurance, isn’t just the right thing to do. It’s a sustainable, profitable business model that boasts high employee retention and better guest experiences.

But in an industry with such tight profit margins, how can restaurant owners afford to offer their employees benefits? The short answer is this: It’s more expensive to lose a good employee. Offering your staff good benefits and a great working environment will help you get them to stick around, which saves you money in the long run.

How Real Restaurants Offer Employee Benefits

Offering employee benefits can be costly. We can’t ignore that.

It can be especially difficult to find room in the budget when you’re just starting out or your restaurant is experiencing a bout of bad financial health. It’s common that businesses with hourly employees will strategically avoid providing their staff with enough shifts to hit the hours-worked threshold that legally requires the employer to offer medical or paid leave benefits. That’s not a good recipe for employee loyalty; in fact, it encourages staff turnover.

Whether you’re starting a new restaurant or planning for the long-term health and success of your current one, it’s worth thinking of an employee benefits plan as a need-to-have, not a nice-to-have. Think of it as an investment in the future of your business, your staff’s lives, and your community.

In the 2019 Restaurant Success Report, we learned 31% of restaurateurs currently offer health insurance to their staff, with 18% providing 401K and 14% offering paid family leave. Benefit offerings vary a ton in our industry, so if you can offer any kind of strong benefits program, you’ll stand out as a desirable restaurant employer.

According to Toast data, in 2019, restaurateurs are offering their employees the following benefits:

Health

31%

Disability Coverage

11%

Dental

21%

Paid Family Leave

14%

Vision

18%

Worker's Compensation

23%

401k

18%

Other

3%

Transit/Commute Reimbursement

4%

If you’re looking for a roadmap for how to create a workplace that values employees’ health and wellbeing, the B Corp community is a great place to start. Formed in 2007, the B Corporation certification is a way for businesses to commit to standards that benefit all stakeholders: consumers, employees, business owners, and shareholders alike.

Today there are nearly 3,000 B Corps across the globe, from a wide array of industries. The list includes successful restaurants like Luke’s Lobster, a growing seafood chain with 28 locations in the U.S. Luke’s offers medical, dental, and vision coverage to all full-time managers, as well as all full-time (30+ hours/week) employees after one year of employment. They also provide things like pre-tax commuter benefits, 401k with a 50% match, and flexible scheduling. They’re notorious for getting it right.

Bamboo Sushi, in Portland, OR, became the world’s first certified sustainable sushi restaurant in 2008 and was one of the first hospitality businesses to become a certified B Corp. They take their responsibility as a business seriously and think of themselves as a catalyst for change. Their website explains, “We make mindful business decisions that connect environmental impact, the prosperity of our team members and purveyors, as well as the enrichment of the communities we live in.” In practice, this includes competitive medical, dental, and vision benefits for full-time team members, along with perks like wireless carrier discounts, weekly pay, and career path training.

Martha Hoover of Patachou Inc., a restaurant group in Indianapolis with 350 employees, has managed to offer paid time off, health insurance, and parental leave to her huge team of full-time staff. “My goal is to keep good people in my company,” Hoover told Food & Wine. She also happily reports that her retention rate is a third higher than the industry average. Dang.

Thai Fresh, an Austin restaurant with 48 employees, shows that positive change is possible with a little patience in the same conversation. After eight years of running their deli and restaurant, Jam Sanitchat and Bruce Barnes were dismayed by the pay disparity between kitchen staff and servers. So in 2016, they tried a base living wage for everyone, banned tips, and increase menu prices by 20%. Sanitchat, the restaurant’s chef, accurately predicted she’d lose 15% of her profits, but sales bounced back in a year and turnover practically disappeared. “The environment is totally changed,” she says. This new policy has also allowed her to add health insurance for full-timers and paid time off for everyone. “I don’t want to go back; it’s working for me,” says Sanitchat.

We make mindful business decisions that connect environmental impact, the prosperity of our team members and purveyors, as well as the enrichment of the communities we live in.

Bamboo Sushi

Mei Mei, a Chinese-American fusion restaurant in Boston and a beloved Toast customer, prioritizes their staff before anything else by covering 50% of health insurance premiums for employees who work over 30 hours and using tip pooling that allows everyone to make a steady and livable wage. They operate under a sustainable business model with minimal environmental impact, and they hire employees who are looking to “learn, grow and advance” through the use of open-book managemnt. This management strategy gives all employees a look at what it takes to run a busines — teaching financial transparency and showing each staff member their direct impact on the business — which helps career paths form in an industry that has long been plagued with little to no upward mobility.

Juliet, in Somerville, MA, is another great example of a restaurant giving employees the opportunity to further their careers rather than just make ends meet. They’ve nixed gratuity and instead provide living wages and profit sharing to all members of staff. “We have a lot of people who are working at Juliet who don't necessarily want to work in restaurants long-term, but they're there because they can learn about the numbers, they can learn about our business model and they can learn how to run a business,” Sam Mangino, a server at Juliet, told us back in June.

How to Find Room in the Budget to Offer Employee Benefits

Even if you’re committed to the idea of employee benefits, rolling out a wide-scale program across a number of benefits-related categories might not be financially feasible right off the bat, and that’s okay. Start small and ease into employee benefits by offering low- or no-cost employee perks that help improve the day-to-day experience and wellbeing of your workers. Things like free meals and team-building activities go a long way to start.

Next, understand that employee benefits will make employee compensation and labor costs a larger share of your overall cost of doing business. As the Thai Fresh example illustrates, a significant shift in your business model to make employee benefits a reality for your restaurant staff may cause a short-term dip in profitability. To make the numbers work, consider increasing your menu prices, adding a surcharge to the check, or reexamining your controllable costs to find additional budget.

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Since high operating and food costs are the number one challenge facing restaurant owners, try using a food cost calculator to see what you’re spending on food and modify your purchases and menu prices according to what your ideal food cost would be. Increasing the amount of inexpensive carbs to your menu helps with food cost, along with adjusting portions to satisfy your guests rather than satiate them. Other options for optimizing your food cost include menu engineering, menu design that promotes your most profitable items, and including seasonal items that use easily available ingredients and increase customer popularity.

If you do decide increasing menu prices or adding a surcharge makes the most sense, be transparent and communicate the reasons behind the change to your guests. Customers might initially be disgruntled to see the price of their favorite dish increase, but if they understand that the price difference provides their favorite bartender with health insurance, chances are, they’ll happily oblige.

Katie Rosengren, Juliet’s general manager, explains how raising menu prices and getting rid of tipping actually made them more competitive. “There are a lot of places around that will charge $15 for a brunch plate and then you tip on top of that. So if we charge you $15 for a brunch plate and you don't tip on top of it, we're actually cheaper than that other place,” said Rosengren.

Labor cost also hugely detracts from your bottom line, so ensuring that you’re attracting the right people is paramount. Labor traditionally makes up 30-35% of a restaurant’s revenue, so monitoring employee hours, cross-training staff to be versatile, and using split shifts to make sure you have the right number of people working at all times can help you round out your profit and make offering employee benefits a more practical spend.

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Your benefits offerings will incentivise staff to stay at your restaurant, but if you’re hesitant to offer benefits because your restaurant has had a problem retaining staff and you don’t want to see your investment walk out the door, consider baking in an incentive to your employee benefits program. Let your restaurant staff accrue time off based on the number of hours they work, or set up benefits that kick in once a staff member has reached a certain milestone, like their one-year anniversary.

For small- to medium-sized businesses, joining a professional employer organization or PEO can help make providing benefits more affordable. These entities help manage all sorts of HR activities, from restaurant payroll to tax filing to health benefits, by entering a co-employment arrangement where the PEO becomes the employer of record for tax purposes. It also relieves a small business’s management team of time-consuming HR tasks.

Benefits That Benefit All

Providing employees with benefits that make their lives more comfortable is an investment, and not every restaurant can afford to provide health care and paid leave. Nevertheless, with strategic planning, cost (or profit) cutting, or higher menu prices, providing these benefits can work. And it's proven to be worth the effort: Many successful restaurateurs have shown that offering employee benefits pays off in staff retention, the ability to attract the best talent, and a reputation that cements the business’s place in its community for many years to come.

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