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Employment pressures continued to grow for the restaurant industry during 2013, despite the fact that the industry’s same-store sales and traffic results were soft during the year and the economy continued to provide mixed signals in terms of its overall strength. Unemployment might still be at historically high levels but the restaurant industry’s growth, currently dependent on opening new stores as well as new concepts coming into the market, has kept employment growth strong and has made recruiting and retention increasingly harder over the last 12 months. This according to the year-end results recently published by People Report, a TDn2K company.
The People Report Workforce Index, a quarterly barometer of market pressures on employment measures, registered an overall reading of 70.2 for the first quarter of 2014. This marks the highest overall index reading since Q4 '06 (70.6).
“This indicates that the people in charge of keeping the restaurants staffed with managers and hourly employees have expectations for increased job growth, an increasing number of vacancies, rising turnover and a tougher recruiting environment for the following quarter,” says Victor Fernandez, executive director of insights and knowledge for TDn2K. “The fact that the index is posting values not seen since before the recession hints at how challenging the current labor market is when it comes to maintaining those vacancies filled and keeping up with the growth rate of the industry”.
The index predicts strong employment growth in the first half of the year across all industry segments, although this growth is expected to be especially pronounced in the fast casual/family dining and upscale casual/fine dining segments.
“The People Report results for December 2013 show the industry adding restaurant management and hourly jobs at a rate of 2.8 percent year-over-year on average during the last 3 months of the year. By contrast, the growth rate was 1.5 percent on average for the period between July and September,” says Joni Thomas Doolin, founder and CEO of People Report.
“This supports the expectations we have been reporting on through the Workforce Index, which predicted a jump in staffing and retention difficulty starting with Q4 2013. Furthermore, this job growth has been pretty widespread within the industry; as an example, 65 percent of the companies tracked by People Report posted positive job growth year-over-year during December 2013” Fernandez says.
The year 2013 also saw restaurant industry turnover for both managers and hourly employees continue to inch upward, especially at the management level. This rise in turnover affected most restaurant companies during 2013. Based on data collected monthly by People Report (representing approximately one million restaurant employees) management turnover increased in 69 percent of those organizations. On average, the increase in annual management turnover was 2.5 percent per company during 2013. The percentage of companies that reported increasing hourly turnover during 2013 was slightly lower, at 61 percent, with an average increase in annual turnover of 4.2 percent.
“From a relative standpoint, the increase in management turnover was much more significant during 2013, which hints at challenges retaining employees at this critical level while hourly turnover seems to be stabilizing” Fernandez says.
As recruiting and retention pressures increased throughout the year, so did compensation growth rates for restaurant managers as additional incentives are needed to fill the growing vacancies and new job opportunities. Median starting salaries for entry-level restaurant managers posted positive growth rates during 2013 compared with the previous year for all industry segments except for upscale casual/fine dining. This comes on the heels of 2012, a year in which median starting salaries decreased when compared with 2011 for most industry segments. As employment pressures continue throughout 2014 as expected, starting manager salaries are also expected to experience upward pressures during the year.