Restaurant employee turnover, vacancies persist in 2Q

The People Report Workforce Index, which measures expected market pressures on restaurant employment, remained at an elevated plateau for the second quarter, indicating that operators will continue to face recruitment and retention challenges for the next three months.

The Workforce Index is produced by Dallas-based People Report and is based on surveys of human resources departments and recruiters in the restaurant industry. It measures from a baseline value of 50, with any results over that level indicating increased pressures on five components: employment levels, recruiting difficulty, vacancies, employment expectations and turnover. Results are based on expectations for the quarter underway.

The second-quarter overall index dipped slightly, to 69 from 70.2 in the first quarter, which was the highest index reading since the fourth quarter of 2006, before the recession started.

“What we are seeing is a continuation of labor-market pressures growing across the industry. It’s building and could snowball any minute,” said Michael Harms, executive director of operations for People Report and sister company Black Box Intelligence. “Employers have to be proactive and keep an eye on the best employees, especially at the management level, because they are in high demand and perhaps low supply.”

Restaurant operators reported a “noticeable increase in vacancies” during the first three months of 2014, with the index reading rising to 65.6 from 56.3. The index has shown that the most significant change in the labor market over the past six months has been the “marked increase” in turnover levels. That component jumped from 47 in the fourth quarter to 65 in first quarter and 66.8 in second quarter.

“What we are seeing is some clear trends emerging,” Harms said. “The expectations have been strong for a while, and vacancies are increasing, particularly at the management level. Turnover is also increasing as well. If it jumps one quarter, it’s an anomaly. If it continues, it’s a trend.”

The “Employment Expectations” component of the Workforce Index increased to 84.2, which the report noted, “is representative of very strong job growth expectations” going into the second quarter. At the hourly level, 72 percent of companies expected to add staff (rising from 49 percent in the first quarter), with just 2 percent of them planning to reduce staff. At the management level, 62 percent of companies expect to add staff in the second quarter (rising from 48 percent in the first quarter), with 38 percent of them maintaining their current staffing rates, and none of them planning reductions.

Harms said restaurant operators are seeing the labor market heat up as unemployment rates continue to slip downward.

“Your best employees always have options,” he said. “Right now, we’re seeing employers having difficulty finding good workers, particularly at that management level. That’s increasing vacancies and ultimately turnover. That’s the string of events that’s starting to happen.”

Workforce Index rankings by industry category for the second quarter were mixed compared to the first quarter:

• Quick service rose to 66.1 from 65.6.
• Limited service/fast casual/family dining declined to 70 from 74.4.
• Casual dining increased to 65.9 from 63.9.
• Fine dining/high volume slipped to 74.2 from 75.4.

“As we move in to the summer months,” Harms concluded, “these labor pressures could intensify, and retaining those good employees could become more difficult.”

Contact Ron Ruggless at [email protected].
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