The COVID-19 pandemic, now compounded by a nationwide staffing crisis, uncovered chronic issues within the restaurant industry.
Low wages, limited benefits, long and unpredictable hours, and little room for growth have employee turnover skyrocketing, reaching an all-time high of 130% in 2020 — more people are leaving the industry than ever before. Restaurants are starting to recover and rebuild from the COVID-19 pandemic, but many are struggling to find staff to keep their businesses running.
There are several factors influencing the staffing crisis, but one, in particular, stands out: the average pay for restaurant employees is simply too low, and restaurant jobs that pay well are hard to come by. In the typical restaurant in the US, servers can make a lot more than their back-of-house counterparts, who are often excluded from the tipping structure. But even when servers make a lot of money one night thanks to large parties and larger tips, there’s nothing preventing them from having a very slow night the following shift. In short, even the highest earners in the industry can face inconsistency and unpredictability in their wages.
In many states, the restaurant minimum wage is still stuck at $2.13 an hour, with servers relying on tips to make a livable wage. With this low minimum wage for tipped restaurant workers — and the higher, but still sorely insufficient minimum wage for non-tipped restaurant workers — it’s up to restaurant owners and operators to figure out how to take care of their staff, and pay fair, livable wages that show staff how appreciated and essential they are to their businesses.
Restaurants where servers make the most money
Generally speaking, servers can make the most money if the food at their restaurant is pricey, and the wines even pricier, since tips are calculated as a percentage of the total of the bill. Higher bill total, higher tips.
That means that fine dining restaurants tend to be where servers can make the most money. Here are three restaurants where servers can make great money.
LDV Hospitality, New York, NY
LDV Hospitality owns restaurants all over New York, including Scarpetta, Nolita Social, and American Cut. Founder John Meadow reported that servers at these a-list restaurants make in the $75,000 a year range, due to high prices and large tips.
Paris, Las Vegas, NV
As a popular vacation destination, Paris in Las Vegas, Nevada sees high tourist traffic, and with that, high server salaries. Some servers were reported to be making upwards of $100,000 a year (and working less than 30 hours a week!).
Marea, New York, NY
Marea, also in New York, is known for paying servers up to $100,000 a year, according to Managing Director Rocky Cirino. Though not every server is hitting that six-figure salary, through a combination of alcohol sales, high table volume, and pooled tips, it’s very possible.
Looking to improve staff retention? Turn your attention inward and focus on boosting employee morale.
Restaurants Trying New Compensation Models
Here are some restaurants that pay well, take care of their employees, and work towards creating a better future for the industry.
Thamee, based in Washington D.C., has taken great strides to create an equitable and fair compensation plan. Thamee’s owners, Simone Jacobson, Eric Wang, and Jocelyn Law-Yone have completely eliminated tipping at their restaurant. Instead, they have implemented a 30% service charge that helps cover higher wages, health insurance, paid time off, and a fund for medical emergencies.
Joshua Lewin and Katrina Jazayeri own Juliet, in Somerville, MA. Similar to Thamee, Juliet is gratuity-free, and prices are set to be inclusive of the service costs. Staff are paid higher wages (above the state minimum wage), and are also included in a profit-sharing plan as a part of open-book management, where employees are given insight into the performance of the restaurant, and incentivized accordingly.
HOUSEpitality Restaurant Group
HOUSEpitality Restaurant Group in Richmond, VA has also eliminated tipping and implemented a 20% service charge. Owner Kevin Healy combined the service charge, along with order and pay at the table technology, to increase hourly wages for all staff members.
How much money can you make as a restaurant server at the HOUSEPitality restaurant group? Kevin has explained that the technology has allowed them to work efficiently with fewer servers, and everyone at the restaurant makes upwards of $15 an hour.
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How to change up your restaurant’s compensation model
If you’re looking to make a change in your restaurant, here are a few ideas to get you started.
Early Wage Access
According to Forbes, 78% of Americans are living paycheck to paycheck, the ability for your employees to access their wages when needed, before payday, is becoming more and more essential. Financial stress is a significant mental burden that can lead to burnout, absenteeism, and turnover, and early wage access can help alleviate these issues.
Offering early wage access can improve restaurant employee experience, increase financial stability and improve retention. According to a PwC employee financial wellness survey, one in four employees were distracted at work by personal finance issues in the past year and 54% said financial or money matters caused the most stress. By providing early wage access, employees can reap the benefits of greater financial flexibility.
Nix Tips and Add a Service Charge
This might sound counterintuitive, but eliminating tipping can bring in more revenue for your restaurant. The traditional restaurant tipping model dates back over 100 years, and for many restaurants, it’s not working anymore, leading to inequality between segments of the staff and leading to inconsistency in server wages.
A service charge, either tacked on the check or implemented through higher menu prices, is a more reliable and equitable way to increase staff wages (and help with other issues, like the pay disparity between front and back of house).
Profit-sharing, or revenue-sharing, gets your staff invested in the profitability of the business. Essentially, profit-sharing includes staff in an incentive-based system where they can earn additional money when the restaurant is financially doing well. This gives employees a stake in the business – if the restaurant is doing well, the employees are paid extra. This is also an opportunity for employees to be involved and learn more about different parts of the restaurant – the financials, management, and overall health of the business.
Restaurant Workers Deserve Better
The restaurant industry is changing. And frankly, staff deserve better. Your employees are the backbone of your restaurant, and work hard to keep everything running smoothly. Whatever you decide to do, make sure to keep your staff involved in the planning, and take their feedback into account. Learn more here about collecting employee feedback and how to communicate effectively with your team.