Servers, host staff, bartenders — and the restaurant operators who employ them — increasingly find themselves in a pickle. And not the type that comes with a sandwich and fries.
Sales are booming, far exceeding pre-COVID levels. Restaurants and bars sold nearly $95 billion of food and drinks in December — an all-time record. But those revenues have been offset by soaring business expenses, such as the cost of labor and goods sold.
As a result, profit margins for the restaurant industry remain a razor-thin 3% to 9%.
Meanwhile, restaurants and bars lost 25% of their workforce to other industries during the pandemic. Over three years later, the number is finally rebounding to pre-pandemic levels, but workforce burnout continues to create additional challenges for restaurant operators, who have always battled high turnover rates. The struggle is even worse now, since a historically tight labor market is making it harder to recruit and retain workers.
All of this is forcing restaurants and bars to get creative in attracting new employees. Some operators are doing so by directly appealing to the needs of current and prospective workers, offering unique packages with new types of fringe benefits.
Traditionally, many restaurants and bars haven’t been able to afford full-blown health insurance packages for their employees. Traditional employer-sponsored health plans cost employers more than $6,500 for individual coverage and $16,300 for family coverage, on average — that’s in addition to the share that employees pay themselves.
Even at the restaurants and bars that do sponsor traditional health plans, many workers are part-time and wouldn’t qualify.
That explains why, across the hospitality industry, seven in 10 employees don’t have employer-sponsored health insurance. This dearth of benefits plays a major role in driving away employees who otherwise enjoy working in restaurants and bars. While bartenders are generally satisfied with their jobs, many cite lack of benefits as a reason for leaving the industry. Over half of respondents in one survey said that health benefits or insurance would make them return to the service industry.
But it’s possible for employers to offer meaningful health benefits to their staff, and at a fraction of the cost of traditional health coverage. It could make the difference between keeping or losing a valued waiter, line cook or bartender — and help ensure that the hospitality industry becomes a place where more people seek long-term careers.
For instance, many employers offer “individual coverage health reimbursement accounts” — essentially, they deposit a sum of money into tax-advantaged accounts that employees can use to help purchase traditional health insurance or pay for medical expenses out-of-pocket.
The key advantage for employers is that their financial burden is fixed. If a bar owner wants to help his workers but can’t afford a full-blown health plan with a premium that will likely increase each year, he can still make a defined contribution of, say, $2,000 toward a bartender’s health reimbursement account.
Other companies are buying their employees subscriptions to virtual primary care platforms, which allows employees to consult the doctors they need to diagnose and treat common ailments, all from the convenience of their homes and at a fraction of the cost of in-office visits.
Smaller restaurants could also strike up partnerships with large liquor or food distributors, which are sometimes willing to absorb some of these small firms’ health care expenses in exchange for promotional considerations or brand exclusivity. Given that many of these distributors already provide restaurants and bars with incentives to sell their products, these types of health care arrangements would build on an existing business model.
Restaurant and bar owners are constantly trying to attract and retain staff, and for many of these restaurateurs, sponsoring traditional health insurance isn’t an option. But that doesn’t mean they can’t add some creative health benefits to the menu.
Sean K. Mehra, of San Francisco, California, is founder and CEO of HealthTap.