PAYDAY Workforce Solutions Blog

Restaurant Turnover Costs Money – 3 Retention Tips to Implement Today

On Aug 1, 2014

With $683 billion dollars in sales, 990,000 locations across the United States, and a workforce that makes up 10 percent of the overall U.S. workforce according to the National Restaurant Association, the restaurant industry is a major economic force. Although turnover rates are down since 2007’s 80.9 percent, they were still high at 62.6 percent in 2013 according to the Bureau of Labor Statistics.

The Association reports that restaurant industry turnover is higher than overall private sector turnover because of several factors, including high numbers of students as employees, seasonal staffing needs, and higher numbers of part time employees than the overall workforce. 28 percent of the restaurant industry’s employees are students enrolled in school versus 11 percent of the total workforce, as reported in the 2012 U.S. Census Bureau’s American Community Survey.

Retention Efforts Save Money

Making an effort to retain employees is good for business, saving money in hiring and training costs, and building a stable workforce. The Center for American Progress cites case studies that show it costs about one-fifth of a worker’s salary to replace them when they leave, and that adds up if a position is vacant more than once a year. Whether the employee left voluntarily or was fired doesn’t matter – the percentage is the same. Saving one fifth of every employee’s salary is well worth the effort to keep employees.

Workplace Policies Affect Quit Rates

The Bureau of Labor Statistics reports that workplace policies are the biggest factors affecting quit rates. Harvard Business School professor Zeynep Ton explains that a combination of investment in the workforce and beneficial operational practices reduces quit rates. FrankCrum human resources director David Peasall has some good recommendations for reducing employee turnover and creating workforce loyalty, including hiring smarter, setting high performance standards, and providing competitive wages and benefits.

1 - Reduce Turnover by Hiring Smarter

The best employees want the job as well as being willing and able to do the job. Skills and experience can be listed in a resume, but attitude and coachability aren’t that easy to determine on paper. Interview for attitude instead of just skills and experience by asking questions about why applicants want the job, why they came to your restaurant for work, how they feel about customers, and what they know about the restaurant business. Ask what kind of training they’ve received and what their reason for looking for a job is to discover motivations. Find out if they are coachable by asking about how they feel about taking direction and training from bosses, trainers, and co-workers.

2 - Set High Performance Standards

Pearsall explains that high performance standards as part of team commitment create expectations that team members will support each other and work toward mutual goals. Explain performance standards during the interview process and ask candidates what they think of them. Developing easy to understand and measure performance standards, training on them, and encouraging friendly competition for recognition and rewards creates a fun and interesting work environment.

3 - Provide Competitive Wages and Benefits

Wages are a hot topic lately, with the proposed increase to the federal minimum wage rate. But even a slightly higher pay rate than restaurants in the surrounding area gives employees the message that you value them and are willing to show that by paying more. Benefits mean a lot to low-wage and entry-level employees, especially if they have families or are working their way through school. And providing benefits can build competitive advantage in a crowded market with low profit margins.

Treat employees with dignity and respect, tell them when they are doing a good job and exceeding your expectations, and ask their opinions to engage and develop a workforce for the long term.

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