Most restaurants operate on razor-thin margins. Historically, this reality has meant that expensive employee benefits are off the table. But a decade ago, some things changed with the Affordable Care Act, which required businesses including restaurants with more than 50 employees who work more than 30 hours a week to offer healthcare plans. Still, most restaurants outside of large chains and restaurant groups weren’t affected. Only 31% of restaurateurs currently offer health insurance.
Now that the industry is going through an unprecedented labor crisis, health coverage has reemerged as a big issue for restaurateurs. Experienced hospitality professionals are in very high demand, so they can pick and choose where they work in the current environment. Increasingly, the availability of benefits, especially healthcare benefits, plays a major role for people in deciding which opportunity to pursue.
Most restaurateurs would love to offer health insurance to their team. The expense is typically the main obstacle. But there are hidden costs to not offering a healthcare plan, too. In some cases, not providing these benefits can prove more expensive than the alternative.
Here are ways that opting out of healthcare benefits can cost you, both in the short term and long term.
1. The best people will work someplace else
There isn’t a restaurateur in the business who hasn’t bemoaned the current labor market. By all accounts, it’s never been harder to find and retain great talent. This impacts the bottom line in numerous ways.
Lack of employees might mean not opening for lunch or not filling the dining room to capacity even when the demand is there. It can also impact service, and when guests are frustrated by long wait times or order mistakes, they may not want to return. This is lost opportunity and potential revenue that can come from being short-staffed.
With so much competition for the top job candidates, it’s imperative that a job offer be desirable. The good news is, people aren’t choosing new positions by salary alone these days. Company culture, opportunities for advancement, work-life balance, and a range of perks and benefits matter more than ever. In fact, benefits are even more important to today’s candidates than higher salaries, according to a recent Glassdoor survey.
2. Employees may be tempted to play hookey
You know the saying: trust but verify. That’s a good maxim for managers across industries, and it goes double in restaurants. When you provide your team with healthcare benefits, it makes a policy that requires doctors notes’ for absences more reasonable from an employees’ perspective. People would have a legitimate complaint if their boss required a doctor’s note without also providing access to health care, after all.
Clearly, this expectation discourages people from claiming they’re not well enough to work when they are. Hopefully this isn’t a common occurrence at any restaurant, but it can happen and cause issues when it does.
In the wake of the pandemic, restaurateurs have generally encouraged team members to stay home when they’re sick. That’s a good thing for everyone. But having a reasonable policy in place that ensures people won’t take advantage in this way means shifts will run smoother.
3. Shift schedules will be less predictable
Though you may not want or be permitted to require employees to take any specific actions that benefit their health, simply having access to basic preventive care can make a big difference when it comes to keeping people healthy and on the job.
For example, those with health insurance are more likely to receive their annual flu shot, which reduces a person’s chance of getting the flu by 40% to 60%, according to the CDC. Preventative care can also keep health issues in check and keep them coming to work on schedule.
Regular health care also means that someone with chronic migraines can get access to effective medication. A person managing a common health issue like IBS or diabetes can get better control of their condition. All of this means people are more likely to show up for their shifts, which benefits everyone on the job and contributes to a restaurant’s success.
4. Productivity suffers
Health insurance isn’t all about annual physicals, flu shots, and antibiotics. Mental health care is a big part of the deal. The Affordable Care Act counts mental health care as one of 10 essential benefits.
When employees have access to mental health care, it benefits employers as well. Untreated depression, an issue for 18% of American adults, is associated with a 35% reduction in productivity. It’s a problem that’s estimated to cost the United States economy more than 200 billion a year.
Imagine what it might be costing your restaurant. If you can increase access to mental health care, people will be happier and more productive at work.
5. You’ll have to invest in new-hire training more often
Offering access to health insurance will help attract the best talent out there. It will also help you keep them. It’s no secret that restaurant jobs can have high turnover—the National Restaurant Association estimates the turnover rate is 74.9% annually. It’s possible to bring that down by creating a supportive environment making people want to work in for the long term.
When people leave for a job that does offer healthcare benefits, they’ll need to be replaced. And most employers underestimate the cost of rehiring a new employee. It’s a surprisingly big expense that can really add up over time when turnover is high (like up around 75%). Replacing an employee is roughly as expensive as about six months of their salary, according to The Society for Human Resources Management.
The average line cook salary in the U.S. is $46,318, according to Indeed.com. So, expect recruiting and training a line cook’s replacement to run about $23,000. On the other hand, healthcare coverage for a single employee costs a small business an average of $6,440 annually, according to a recent report from the Kaiser Family Foundation. You don’t need a whiz accountant to crunch those numbers.
A typical restaurant kitchen sees several back of the house team changes during a typical year, but a solid employee benefits package can bring that churn and the accompanying cost down substantially.
When you consider all the costs of operating without a health plan in place for employees, it puts the expense of offering one in a different light. It’s always excruciating to add line items to your budget for new costs, and every restaurant’s situation is different. But it’s important to remember that just like any other decision, not offering benefits comes with its own costs.