Running a restaurant is not an “easy business”. You must take care of endless responsibilities – from managing staff schedules to ensuring the highest standards of food and service. As a restaurant owner, you are responsible for a myriad of tasks every day.
However, one often overlooked aspect of restaurant operations is human resources (HR). Many restaurant owners mistakenly believe that HR practices apply only to traditional office environments. But the truth is that HR needs in restaurants are just as critical, if not more so.
In this post, we will understand why HR functions matter in the restaurant industry. We’ll also look at how they apply specifically to restaurants and why a professional employer organization (PEO) could be the ideal solution for you to address these needs.
You may be a small family-owned restaurant, or perhaps, part of a larger chain. Regardless, you must adhere to a number of legal and ethical standards, many of which involve HR practices. While the environment in a restaurant might seem less formal than an office setting, HR regulations still apply (in most regions).
You must ensure the well-being of your employees while maintaining the operational success of your business. So, it’s safe to say that HR practices go beyond recruitment and hiring. They include maintaining compliance with labor laws, tracking employee hours, ensuring fair wages, and more importantly, creating a work environment that complies with safety standards.
But for restaurants, where staff turnover tends to be high, HR management becomes even more important. You need proper HR management, especially when you’re dealing with fluctuating shifts, seasonal employees, and various job roles – from chefs and servers to bartenders and dishwashers. It is essential not just to maintain order but also to protect your business from potential legal issues.
By now, we understand why and how running a restaurant means unique HR challenges. However, with the right strategies in place, they can all become easy for you to tackle. So, here are some of the most important HR issues you should be aware of to start developing effective strategies:
One of the biggest HR concerns in the restaurant industry is tracking your employees’ hours accurately, especially given the nature of restaurant work. Employees often work irregular hours, with shifts that change day to day. This makes it important for you to have an efficient timekeeping system in place.
If you fail to track hours accurately, you can face legal penalties, especially when it comes to overtime pay. That’s one of the main reasons why restaurants must follow the Fair Labor Standards Act (FLSA) to ensure employees are paid for the hours they work – including overtime, if applicable.
While servers and kitchen staff may earn tips, their base wages still have to meet minimum wage requirements, and tips cannot be counted towards overtime calculations. So, you should have clear systems in place to monitor both regular and overtime hours. Otherwise, inaccurate tracking will increase the risk of penalties and also lead to dissatisfied employees (and a higher turnover).
Compliance with minimum wage laws is another crucial HR responsibility in the restaurant industry. Many restaurant employees – especially servers – rely on tips as a part of their compensation. In some states, you can pay servers a lower hourly wage. However, that amount must be supplemented by tips to meet the state’s minimum wage requirements.
For restaurant owners, it can be a bit tricky to ensure HR compliance because state and local wage laws vary. What’s considered minimum wage in one area might not be sufficient in another. Therefore, you should keep up with wage compliance to avoid lawsuits or fines.
Furthermore, it’s important to regularly review compensation plans and ensure your restaurant is paying employees fairly. Offering competitive wages can improve employee retention, which is critical for restaurants with high turnover rates.
It’s common for restaurant employees to face physical risks while at work. From burns and cuts in the kitchen to slips and falls in the dining area, your workers are at risk of injury. So, as an employer, it’s your responsibility to protect your employees and make sure they’re covered in case of an injury on the job.
This is where a worker’s compensation policy kicks in for restaurants. Worker’s comp insurance covers medical costs and lost wages for employees who sustain injuries while working – and it also protects employers from potential lawsuits.
So, make sure your workers are aware of the procedures in place if an injury occurs. Additionally, you can have safe practices to keep the work environment safe. This might include training employees on safe food handling, proper lifting techniques, and how to deal with hazardous situations.
You also have to manage employee benefits like health insurance, vacation time, and paid sick leave. While many small businesses struggle to offer robust benefits packages, it’s still important to understand your legal requirements and provide employees with the benefits they are entitled to.
On the other hand, payroll management is also important. If you face a high turnover, managing payroll can be time-consuming and prone to errors. And, incorrect payroll calculation can lead you to legal penalties.
So, you have to make sure that employees receive the correct payment on time. Moreover, you have to pay attention to the tax implications of offering benefits. You also have to consider the rules around deducting wages, taxes, and other contributions.
High employee turnover is perhaps one of the biggest challenges restaurants face. In fact, some experts think that turnover in the restaurant industry is higher than in many other sectors. That’s one major reason why recruiting and retaining employees is often a critical function of HR in the restaurant business.
You have to practice effective recruitment and hiring strategies. Why? Because they are essential for building a strong workforce. Training new employees and helping them feel supported is one of the most significant ways to reduce turnover. Additionally, you can offer incentives to encourage them to stay longer and foster a positive work culture to boost that longevity.
Given the many HR complexities you face with running a restaurant, a Professional Employer Organization (PEO) can be an invaluable partner for your business. A PEO can take over the time-consuming and complicated HR functions. In turn, they will allow you to focus on what you do best – running your businesses.
A PEO is a company that partners with small and medium-sized businesses to manage HR tasks. It usually takes care of functions like payroll, benefits administration, risk management, and compliance with labor laws. You can think of the PEO as a co-employer that handles all of the administrative HR responsibilities while you maintain control over daily operations. Here’s a proper breakdown of how this works:
So, how do you tackle the HR challenges while running a restaurant? You start by optimizing basic functions like hiring and recruitment. Then, you start developing strategies for other functions like onboarding and training, and finally, practices to respectfully and ethically (and legally) let go of employees.
As a restaurant owner, you must navigate complex laws regarding wage compliance, worker safety, benefits, and more. Therefore, we recommend partnering with a PEO to ensure your restaurant stays compliant, reduces risks, and offers competitive benefits—all while freeing up your time to focus on growing your business.
TBM has over thirty years of PEO experience and specific expertise to help restaurants like yours manage their HR. Contact TBM today to learn more!