Article

For Love or Money: Reducing Turnover with Rewards and Benefits

In 2018, restaurant industry turnover reached a post-recession high of 74.9 percent. High turnover rates mean that managers spend a disproportionate amount of time hiring, training and rehiring employees, who often last fewer than 60 days.

Creative independent operators are figuring out ways to keep their staff engaged and happy. And it's not all about the money.

High turnover comes with a cost, which the Center for Hospitality Research at Cornell estimates as $5,864 for a front-of-house worker, taking into account lost productivity, recruitment, hiring, and training. Looking for new ways to attract and retain good workers, many operators are turning to employee rewards and benefits.

The Jeff Ruby Culinary Entertainment Group, which owns six restaurants in three states, enjoys a monthly turnover that's roughly half the industry's average. Not only is their turnover in the mid-forties month to month, but they've maintained that rate while opening three restaurants in the last five years, notes Ryan Coslett, chief people officer of Jeff Ruby Culinary Entertainment. "Over 50 percent of staff have been with us for over a year, and around 100 out of 700 have been with us for more than five years," Coslett explains.

For Jeff Ruby Culinary Entertainment, and for other restaurants that have adopted employee benefits in an industry with razor-slim margins, taking care of people -- including those who work for the restaurant -- is more than an inspirational motto, it's a good business decision.

Here's how they've found ways to reward their workers in an industry where all too often leaders claim it isn't possible to nurture people and be profitable.

Staying Connected

"[My father] never had a family growing up, so it was automatic for him to want to take care of his work family in the sense you take care of your own family," says Britney Ruby Miller, who's the daughter of Jeff Ruby and serves as president of Jeff Ruby Culinary Entertainment.

But what does it look like to walk the talk of treating workers like family? Coslett, who says that a "culture of caring" has existed at Jeff Ruby Culinary Entertainment since the early 1980s, explains that "we spend money and time and make a priority each year to foster communication and community" among employees.

One year, they brought all the executive chefs to San Diego to spend time together, do research and development, and be inspired. "That comes with an expense to the company, but it drills down to the heart of the organization, which is it's a family business, [and] most business decisions go back to trying to treat each other like family." In this case, listening and spending time together.

These perks aren't just for executives. Recently, front-of-house employees who won a wine contest got to spend several days in Napa Valley, touring wineries and having meals with the leadership team.

Harvard Business School Assistant Professor Ashley V. Whillans notes that more than 80 percent of American employees do not feel recognized or rewarded at work, so this problem isn't endemic to the restaurant industry. Operators don't need to give a cash gift or trip to wine country to cultivate community and show appreciation for good work.

Non-cash gifts, such as restaurant gift certificates or tickets to an upcoming sports game, provide employees with a quality experience they can enjoy with family and friends. Whillans notes that employees feel awkward talking about cash bonuses but enjoy talking about non-cash rewards with colleagues, and this workplace chatter can motivate other employees to perform their best.

Operators can also find out what their employees enjoy and what changes they'd like to see. Opening lines of communication and finding out what you could do to make employees happier in their roles benefits all parties.

Van Eure, owner of Angus Barn in Raleigh, North Carolina, knows the value of recognizing and rewarding employees. "We're always trying to do fun contests and competitions. Forty people must have dressed up for Halloween," Eure explains. In addition to seasonal contests, Angus Barn employees who receive compliments are entered into a monthly prize drawing. Upon reaching their one-year anniversary, employees are "invited to dine at the restaurant to experience the service we expect them to give," says Eure.

Eure cultivates a team environment at Angus Barn, something she says benefits the restaurant and employees because "everyone's willing to do what it takes. If the dishwasher is backed up and someone has a free minute, they're gonna jump on the dish machine."

Empowering Employees

"We treat employees like they're their own managers of their own area, [they get] a lot of responsibility right from the beginning...being hired here," says Eure, who credits empowering employees with their low turnover rate, which is currently 25-30 percent. Empowered employees understand their role, their authority, their priorities, and what's expected of them -- so they can act with confidence, something that feels good.

Van Eure, owner of Angus Barn in Raleigh, North Carolina, knows the value of recognizing and rewarding employees. "We're always trying to do fun contests and competitions. Forty people must have dressed up for Halloween," Eure explains. In addition to seasonal contests, Angus Barn employees who receive compliments are entered into a monthly prize drawing. Upon reaching their one-year anniversary, employees are "invited to dine at the restaurant to experience the service we expect [them] to give," says Eure.

It can be difficult for an owner to give employees so much responsibility, Eure admits, but she says that those who do find their own job becomes much easier. "People will work hard for somebody that treats them well, [and] if you treat them like they need to ask permission to do every single thing, they will lower to that expectation...Being nice and respectful and kind doesn't cost anything, it's free."

Along with intrinsic rewards and recognition for milestone anniversaries, Angus Barn employees get a full suite of benefits: "We offered employee and family insurance coverage since day one, profit sharing and 401K plan from day one, paid vacation, bereavement pay, sick pay, jury duty pay."

"We wanted this to be a career and not a regular restaurant feel where you're gonna come and work for a year, then leave," Eure says. Their intentions have paid off; workers are so loyal that third-generation employees now work at Angus Barn.

Promoting Wellness

Since 1982, Jeff Ruby Culinary Entertainment has offered company-paid health care for all full-time employees (25 or more hours/week), beginning after 90 days of employment. Miller notes that, "With three to four restaurants, [healthcare] was still a seven-figure number that could have been on a salary to the owners," but that ultimately it was more important to do the right thing by restaurant workers. "Short-term greed, long term regret is our motto," she adds.

To promote wellness in the workplace, Jeff Ruby Culinary Entertainment managers talk openly about difficult personal issues that are prevalent in the industry, including suicide and mental health. Managers who take the time to engage employees in conversation about issues that impact the industry show they care. Repeated conversations can strengthen the bonds of cohesion, while showing workers what it means to be "family."

Employees at Jeff Ruby Culinary Entertainment receive paid time off -- three weeks of PTO for management and corporate folks from the date of hire, and a sliding scale for restaurant staff, who become eligible after one year of employment. "We're seeing it being used by the folks we hope would use it, some of our hardest working folks, [like] dishwashers, line cooks, and servers, who need time to refresh and be well," says Coslett.

While paid time off and health insurance are part of employee wellness at Angus Barn and Jeff Ruby Culinary Entertainment, traditionally few restaurant operators offer these benefits for workers. Without access to health insurance or paid time off, restaurant workers often don't seek medical care when they need it.

Retirement benefits aren't within every operator's budget, but one in six restaurant workers live below the poverty line, according to the Economic Policy Institute. The median hourly wage for restaurant industry workers, including tips, is $10.00, compared with $18.00 outside of the restaurant industry. There's no getting around one simple fact: there's a relationship between low wages and high turnover rates. Restaurant operators who retain top staff often pay premium wages.

A study from the CDC found that over half of restaurant employees have worked while sick, and that four in ten didn't even tell their manager they were ill. Sick restaurant employees are linked to hundreds of outbreaks of foodborne illnesses each year. Some restaurant employees work while sick because their employers do not have paid sick leave or sick policies.

Approximately half of employees who've worked while sick said that not getting paid for a shift factored into their decision. Twenty-five percent said they were afraid of losing their job if they didn't show up for work, says Candess Mendola, editor of MakeFoodSafe.com.

In this case, change may be coming from outside the industry as states and cities (such as Dallas) pass mandatory sick leave or paid time off policies. Individual operator reaction to Dallas's new sick leave policy is mixed, with some employers griping about the structure of the Dallas law and others willing to accept the law if it leads to a more devoted workforce.

New York is considering a paid leave policy, which would give industry employees two weeks of paid leave (in addition to one week of paid sick leave, already mandated by law). In an editorial in the New York Post, Melissa Autilio Fleischut, CEO of New York State Restaurant Association, called the proposed law "yet another mandated compensation increase, forcing employers to make difficult decisions about employee hours and pay, while creating extreme scheduling uncertainty."

Fleischut claims that employers need to "[pay] two people to perform a single job responsibly" each time an employee takes a day off, under the proposed law. Shift trades, Fleischut believes, provide the right flexibility for restaurant workers.

Fleischut says, via email, that paid vacation or wage increases are "a perfectly appropriate way" to approach the issue of turnover, but notes that not all restaurants can afford these perks. For those including "with little to no room in the operating budget...initiatives that add to the worker experience without hurting the bottom line such as flexible scheduling, positive worker recognition, or training opportunities" could work.

Financial Incentives

Jeff Ruby Culinary Entertainment is close to rolling out a 401K program that comes with a company match. Says Coslett, "We tried to be more intentional about listening to folks, [asking] what would be valuable to you and your family" and retirement continued to come up. "From an HR standpoint, the benefits for us are to do the right thing for our staff, make sure they and their families have a system that allows them to save for retirement, [and] continue their financial wellness in the long run."

Retirement benefits aren't within every operator's budget, but one in six restaurant workers live below the poverty line, according to the Economic Policy Institute. The median hourly wage for restaurant industry workers, including tips, is $10.00, compared with $18.00 outside of the restaurant industry. There's no getting around one simple fact: there's a relationship between low wages and high turnover rates. Restaurant operators who retain top staff often pay premium wages.

Saru Jayaraman, director of the Food Labor Research Center at the University of California at Berkeley and co-director of Restaurant Opportunities Centers (ROC) United, notes that roles within the restaurant industry tend to be concentrated by ethnicity, race and gender, and that positions that pay a livable wage -- such as fine dining bartenders and servers -- tend to be held by white, male workers.

Jayaraman says that women who are dependent on tips receive unwelcome advances from customers, and have to choose whether to speak up or put up with the behavior in hopes of earning a tip. From 1995 to 2016, restaurant workers, mostly female, filed over 10,000 sexual harassment claims with the Equal Employment Opportunities Commission.

Tipped wages not only encourage unwelcome attention, they contribute to financial insecurity -- say, when there's a slow night or someone's cut early, losing out on wages. Some restaurant operators have gotten rid of tipping in favor of a stronger hourly wage. At Sea Creatures restaurant group in Seattle, customers pay a 20 percent service charge, which covers higher hourly wages, plus health and retirement benefits. While servers receive wages equal to what they earned before, cooks have seen a 7 percent raise and dishwashers now earn 20 to 30 percent more, co-owner Jeremy Price told The Stranger. To Price, the move is not only toward fairness, but something that will help the restaurant attract and retain top talent.

Independent operators need to understand that when they eliminate tipping, they lose the tip credit, which significantly reduces the cost of labor of service staff. Nevertheless, as cities raise minimum wages, more restaurant owners will have to reconsider labor costs and the case for ending employee tips could reach a tipping point.

Mobility

"High turnover can be cut in half if you pay a livable wage, provide benefits, and provide mobility," says Jayara- man, who notes that ROC United offers a racial equity toolkit for equity and mobility, which is available for free download at https://rocunited.org/. Two-thirds of restaurant workers say they've never been promoted to a position that pays more; fewer than two-thirds said they were even offered training to move up the rungs. Jayaraman notes the lack of mobility keeps the industry racially segregated, where people of color either work in casual restaurants that pay less, or low-level positions (busser rather than bartender).

When there's no upward mobility for employees, they'll leave. Thus employee training and promotion opportunities counteract high turnover rates. Jayaraman cites Zingerman's, the Ann Arbor, Michigan sandwich shop, as an example of a restaurant that provides workers with promotional opportunities all the way up to ownership level.

What unites operators who are proactive about employee rewards and benefits is a mindset shift, where they are willing to do the right thing by employees because they believe that, aside from being the right thing to do, rewards and benefits deliver tangible value to employees, their business, and their customers.

At Angus Barn, Eure allows employees to cross-train in any department they want to learn. With two catering facilities in addition to the restaurant, "there's a lot of room for advancement." Angus Barn also has an on-call option, which is often used by pregnant employees and workers who get other jobs but want to pick up the occasional weekend shift, where workers who need to cut back can work just twelve days a year and maintain on-call status.

Jayaraman mentions a fine dining restaurant in San Francisco that diversified their front-of-house staff with help from ROC United. "Not only did they end up finding a lot less turnover, because when people feel like they can't move up based on their identity, they leave," but the restaurant gained "a whole new market of people of color clientele."

Jayaraman says, "There is a way to move to higher wages profitably, [ROC United] can prove it," citing data from their 800 member restaurants and the seven states that have gotten rid of tipped minimum wages. "Restaurant owners who go to one fair wage retain staff for decades and avoid severe shortage and turnover problems other people are experiencing."

"There's no reason except fear," Jayaraman says, when asked what holds employers back from raising wages. "It is the lowest wage workforce in America. Turnover rates are due to wage level, sexual harassment is very much due to subminimum wage for tipped workers... Even if you are afraid, take the time to learn about what's possible and how it could be done."

Solving Problems

Restaurant operators who've taken steps to solve problems in their employees' lives hope to cultivate worker loyalty by alleviating some of the reasons good employees leave.

There are over one million single mothers working in restaurants who must dip into their wages to pay for childcare if family members aren't available. Camila Marcus of Westbourne in New York City announced in October that the restaurant would pay $50 per day of care for employees who want to use a daycare provider chosen by Marcus.

Hoping to counteract rising rents in a booming market, Table 301 Restaurant Group in Greenville, South Carolina is testing a $200/month rent subsidy for employees who want to live downtown. Citing rent increases of four percent in the last year, restaurant owner Carl Sobocinski is piloting the rent subsidy with 10 front-of-house employees who had to apply for the assistance program, pass a 90-day trial, and agree to work for the restaurant group for one year if accepted. Sobocinski, who notes that the restaurant can control employee wages, but not the availability of affordable housing, hopes to include back-of-house hourly workers in the program when it expands beyond the pilot phase.

While flexibility is often a reason people work in restaurants, unpredictable schedules burden employees who may not be able to budget, arrange childcare, or keep scheduled appointments. New predictive scheduling laws in states including Oregon, Pennsylvania, and New York, provide employees with advance notice of work schedules, so they can plan accordingly.

A new study from the University of California Hastings Center for WorkLife Law indicated that retail workers were less stressed and had better sleep with stabilized work schedules. Setting schedules in advance while allowing for shift trades is a best-of-both-worlds approach that any operator can implement.

The question remains, how does an independent operator accomplish this with the unpredictability of how many guests will show up on any day for any shift? This is the conundrum posed by predictive scheduling laws.

At this time, the best hope might be predictive analytics, which not only aids staffing but purchasing cost control.

Consider Lutz Finger, a data expert in residence at Cornell University's S.C. Johnson School of Business, who worked with a team of graduate students to help a small, family-owned restaurant on the Jersey Shore harness its point-of-sale data to make more informed decisions about inventory management.

Circus Drive-In is an iconic concept launched in 1954 and based, in part, on fresh made-to-order burgers, without using a frozen product. (Unfortunately, the well-known restaurant was reportedly closed in 2017 after the sale of the business's property to new owners.)

Because of the long-established restaurant's proximity to the shore, weather often influenced guest trafic. The owners certainly understood that poor weather could hinder sales and fair weather could boost it; however, not with great precision.

In addition, while most people who live at or frequent the Jersey Shore are aware of seasonal weather patterns in a broad sense, to predict the weather week-to-week with any consistency would require deeper analysis into data garnered from archived weather history.

Lutz and his team analyzed historical sales against weather data to predict guest trafic and sales with the objective of creating a predictive model of weekly purchasing needs. Using this model, the amount of waste was reduced to 700 patties per season and prevented 3,100 hamburgers from being discarded. That previously wasted inventory amounted to a lot of hard-earned cash in the trash.

The process also can be used to determine staff scheduling a week or more in advance. This is your future.

Shifting Mindsets

Operators may have to weigh the costs of rewards and benefits with the cost of turnover and decide which costs they'll bear. Jayaraman believes that independent operators have an advantage here; they "can be nimble and creative" in trying different solutions, whether it's paying a full minimum wage or creating pathways to mobility. Size has nothing to do with the ability to offer solutions, Miller notes: "It's the mentality of knowing the bigger picture and what your expense is bringing to the brand overall."

What unites operators who are proactive about employee rewards and benefits is a mindset shift, where they are willing to do the right thing by employees because they believe that, aside from being the right thing to do, rewards and benefits deliver tangible value to employees, their business, and their customers.

Sobocinski is active on affordable housing initiatives in Greenville. Angus Barn holds an annual Walk for Hope, established in memory of founder Thad Eure, Jr., which raises money for mental illness and psychiatric research. Jeff Ruby supports charitable organizations and he mentors fatherless teen boys, cheering them on at sports games and giving them tickets to Cincinnati Reds and Bengals games. Operators who are naturally charitable and who think of their restaurant as a force for good within the community may have an easier time making these mental shifts than operators who have a scarcity mindset of fighting for every dollar.

Offering meaningful employee benefits is a challenge for independent operators who are strapped with tight margins. That said, in a competitive labor market and given the cost of turnover, finding ways to reward and keep, staff is critical.