Employee turnover at restaurants is on the rise, another indicator that the industry is in a recovery, according to the latest People Report Workforce Index.
For the first quarter of 2011, the People Report Workforce Index, or PRWI, found that 47 percent of surveyed companies reported increases in hourly worker turnover and 49 percent recorded higher management turnover. In last year’s first quarter, only 13 percent of companies reported increased hourly worker turnover and 33 percent saw higher management turnover.
“Turnover has been at historic lows for the last two years, but it is starting to catch up with us,” said Michael Harms, senior business analyst for People Report, a Dallas-based firm that tracks human resources data for more than 100 operators.
The index surveyed 66 restaurant companies, including McDonald’s Corp., Darden Restaurants Inc. and The Cheesecake Factory Inc., on employment expectations for the first three months of the year. The quarterly index measures five workforce components: the actual increase or decrease in employee headcount, the anticipated increase or decrease in numbers of employees, recruiting difficulty, job vacancies and turnover.
Turnover typically improves as the economy improves, Harms said.
The People Report index noted that its sister organization, Black Box Intelligence, marked modest sales growth for the industry in the second half of 2010. Black Box tracks sales and operations data for member companies.
Signs of improvement also are coming from market researcher Technomic. The Chicago firm recently revised upward its 2011 forecast for the foodservice industry, citing sales momentum at many restaurants in the fourth quarter and improved macroeconomic data. In addition, the National Restaurant Association forecast that the U.S. restaurant industry is poised to hit a record $604 billion in sales this year
The latest PRWI revealed the foodservice industry posted positive job growth in the final five months of 2010 and saw only two months of job losses for the year. The industry lost jobs in 10 months of 2008 and in 11 months in 2009. But in 2010, the industry added 188,400 jobs, the highest total since 2006. Employment levels are back to pre-recession 2008 levels.
“We’re starting to see more vacancies and turnover going back up,” said Joni Doolin, chief executive and founder of People Report. “We’re starting to see movement after people have been hunkering down in their jobs the last couple of years.”
According to the index, the employment levels component — the employee headcount — rose to 64.4 in the first quarter of 2011. A rating of 50 or higher indicates operators expect some difficulty in managing any of the index’s five components. A rating less than 50 indicates they expect less difficulty.
The first quarter of 2011 is the fourth straight quarter that companies have reported adding to their payrolls. Forty-three percent of surveyed companies added hourly workers, while only 12 percent made reductions in hourly staff. Thirty-three percent added management employees and only 11 percent cut management positions.
The PRWI also measures employment expectations by industry segments. Quick service, fast casual and fine dining all posted ratings higher than 50 for turnover. Casual dining rated turnover at 44.0.
“Our fine-dining partners were the most battered of all segments [during the recession],” Doolin said. “These are expensive restaurants that are frequented for business or special occasions. People just stopped using them, but clearly they are coming back.”
Casual dining, the first to be hit by the recession, may be the last to make a full recovery, Harms said.
“Sandwiched between the high-end price point and the low price point, they led us into that downturn, so some of them might be a little more cautious than the other segments,” he said.
Doolin said companies should pay attention to employment practices and employee retention as the economy recovers.
“We know there are companies out there that have been doing a ton of work around employee satisfaction and people practices,” she said. “They are going to be ahead of their competitors.”