The hospitality industry is experiencing a boom in demand yet faces a significant hurdle: a hiring crisis and a nationwide workforce shortage for key workers, including housekeepers, front desk staff, hotel managers, bartenders, servers, and banqueting staff.
In this article, we’ll deep dive into hospitality industry turnover and explore potential solutions to help employers navigate this challenging environment.
New research recently found that 41% of frontline workers have changed jobs in the past year—this statistic rises to more than half for hospitality workers in bars, restaurants, and hotels.
The average turnover rate in the hospitality sector is currently 4.9%, compared to the average of 3.2% across all industries.
Furthermore, a July 2024 report from Schmidt & Clark found that the leisure and hospitality industries recorded the highest employee exit rates in early 2024. Nearly 3 million people left their leisure and hospitality jobs between January and April this year, 204% above the national average quit rate. (Trade, transportation, and utilities came second, 180% higher than the national average.)
The hospitality industry’s worker shortage can be attributed to multiple factors. Covid 19 played a significant role, with many employees leaving the industry for more stable, better paying, or remote opportunities. Meanwhile, the competition for talent has intensified, making it even harder for companies in the hospitality sector to attract and retain qualified workers.
Let’s examine more critical factors that may cause hospitality workers to leave their jobs.
Hospitality is renowned as a high-pressure work setting that can lead to elevated employee stress levels. Worse still, hospitality workers can be subjected to bullying and sexual harassment.
Most employees can only sustain working in a toxic, stressful work environment for so long before seeking employment elsewhere.
The hospitality industry offers excellent opportunities for young people looking to join the workforce. These jobs often help them to pay their bills while they’re in school or college. However, many hospitality jobs provide minimal training and skills development, and rarely provide a clear pathway for career advancement.
While some workers get promoted into management roles, most hospitality workers must be content with a career path that only moves laterally. Employees looking for career advancement opportunities are forced to seek it in other fields that provide a better pathway for growth.
As of July 2024, the average hourly wage for hospitality workers in non-supervisory roles is just $19.61. This doesn’t provide a living wage in many parts of the country.
It’s easy to understand why workers on such low wages would turn to other industries that can provide them a better salary.
Employee burnout has been one of the most significant factors driving the mass exodus of workers from the hospitality industry.
Most hospitality jobs require employees to work long shifts during non-traditional hours, including nights, weekends, and holidays. This creates a situation where employees often work vastly different schedules from their family and friends, limiting their time to connect with their loved ones and enjoy many of the activities that others participate in.
Using more robots in the hospitality industry to close labor gaps can backfire and cause more human workers to quit. A recent study involving more than 620 lodging and food service employees found that “robot-phobia”—the fear that robots and technology will take human jobs—increased employees’ job insecurity and stress, leading to greater intentions to quit.
The impact is more pronounced among workers who have direct experience working with robotic technology, but also affects managers and frontline workers.
Despite these challenges, there are some critical steps hospitality employers can take to reduce and manage their turnover rates. Here are a few key strategies:
One way to better attract and retain top talent is to offer competitive salaries, attractive benefit packages (including health insurance, paid time off (PTO), and retirement plans), and flexible scheduling options.
Financial wellness programs provide employees with information, coaching, and support to better equip them to manage their day-to-day financial challenges and concerns. Such programs might include online, telephone, and even in-person counseling and workshops.
To tap into a wider talent pool, look for workers from diverse backgrounds, for example:
On-demand pay, also known as Earned Wage Access (EWA), is an optional financial tool that lets employees access their wages in real-time. It’s a departure from the traditional biweekly or monthly payroll model.
EWA is particularly valued by lower-income or hourly workers who often find themselves living paycheck to paycheck. It’s an effective way to allow your employees timely and dignified access to cash if they find themselves financially stretched in between paydays.
EWA programs aren’t loans. Employees have already performed the work for which they’re being paid. EWA simply gives employees the option of collecting some of the wages they’ve earned ahead of their regular payday. They can transfer these funds into their bank account or onto their card in real-time.
While it’s impossible to prevent employee turnover altogether, here are some methods you can use to fill open roles left by departing workers faster:
Charton Management has been in the Quick Service Restaurant (QSR) business for more than 40 years. They have faced many challenges along the way, but have always managed to stay ahead of the curve with innovative business strategies.
One of the biggest challenges facing fast-food and fast-casual restaurants is extraordinarily high employee turnover. Most restaurants can expect a turnover of around 80%, but the QSR business experiences up to 130%, turning over more than its entire workforce every year. Retaining employees and attracting new ones is not only essential in keeping the Charton business going, it often takes up a huge amount of their management’s time.
“Staffing has been an issue in the QSR industry lately, and everybody’s competing for the same employee. Early access to pay may be the deciding factor of where an applicant decides to work,” says Ord Delaney, Director of Operations, Charton Management, Inc.
Offering employees financial wellness benefits from Payactiv ensures Charton Management can keep their current employees longer than their competition and attract new applicants.
Read the full case study.
A strong team is the backbone of any successful organization in the hospitality industry. By prioritizing your workforce and following the guidance shared in this article, you can build a competitive advantage and ensure your company thrives in the coming years.
Why not consider Payactiv’s popular EWA service and complementary financial wellness program as part of your employee benefits package? Click here to schedule a demo or get in touch to speak to one of our expert team today.
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