Employee turnover can be one of your biggest costs as a restaurant owner. From creating a job posting, to interviewing candidates, to providing training, employees require a huge investment in both cost and time. And when they leave, it can be expensive.
High employee turnover is a common battle that restaurants face. But that doesn’t mean you’re resigned to an endless game of hiring whack-a-mole.
If you’re experiencing high employee turnover in your restaurant, you’re not alone. According to a 2023 Homebase study, retaining current employees is a top concern for more than a third of small business owners.
Fortunately, you’re in the right place. Read along for a low-down on the impacts of employee turnover, how to calculate employee turnover, and top tips for retaining employees.
What is employee turnover in the restaurant industry?
Employee turnover is a measure of how many employees have left your organization within a specific period of time.
Turnover can happen for a number of reasons: employees can leave voluntarily, be laid off, or be let go through termination.
Employees will always come and go. Some turnover is natural, especially in industries that can’t provide a ton of upward mobility. But if your restaurant feels like a constant revolving door of employees, it’s usually a red flag that there are some deeper issues at hand.
The restaurant industry as a whole does tend to face higher-than-average turnover due to the demanding nature of the work. It’s fast-paced, deals with a lot of criticism from customers, and the hours are often unpredictable.
Throw in a few tumultuous years thanks to COVID-19 and turnover rates for the restaurant industry are higher than they’ve ever been. Many restaurants are seeing more staff leaving than staying. Limited-service and fast-food restaurants are experiencing turnover rates as high as 144%, while full-service restaurants aren’t doing much better, sitting at an employee turnover rate of around 106%. This means that in a fast-food restaurant with 100 employees, 144 would have left within the year.
But even before the pandemic, employee turnover in restaurants was as high as 75%. This is a stark contrast compared to the average turnover in the United States of around 45% (back in 2019).
Constantly having to hire and replace employees can have a long-lasting impact on your restaurant business. So with rates like these, it’s no surprise that more restaurants are turning their attention to employee turnover.
How high employee turnover impacts your business
A lot of business owners and managers have this notion that employees are replaceable. Of course, to some extent that’s true. But it doesn’t mean turnover doesn’t significantly affect your business operations and restaurant success.
The high costs of high employee turnover
- Increased financial costs: Hiring and onboarding new employees is time-consuming and expensive. The average cost of replacing an employee can cost as much as 2x their annual salary. The true cost of employee turnover can depend on factors like years of experience and the role itself. But in every instance, it still costs some serious cash.
- Decreased productivity and customer satisfaction: Hiring takes time. So when an employee leaves, they often can’t be replaced right away. This can lead restaurants to be understaffed and unable to meet customer needs in the short term. Even when new hires are brought in, it can be weeks before they’re fully caught up.
- Lowered employee morale: Constant change in teams makes it difficult for employees to build relationships with one another. It also creates a sense of uncertainty, since employees don’t know who’s joining and who might jump ship next.
Even when it comes to replacing your departed employees, it’s not always that simple. The labor shortage is real—with post-pandemic changes to the workforce and restaurant industry, small businesses and restaurants are already struggling to hire new staff, let alone replace current ones.
These challenges have underscored the true impact of high employee turnover. Understanding and getting a handle on your employee turnover should be a top priority.
How to calculate your employee turnover rate
So, how can you get a better sense of the number of employees coming and going? You need to know your current employee turnover rate. This is an important metric to regularly track and compare each quarter, or at least once a year.
Calculating your employee turnover is actually pretty simple.
First, you need to decide on the time period you want to measure for. For example, you might want to understand your turnover rate for the last 12 months or for the last fiscal year.
For many smaller businesses, employee turnover rates are most valuable annually or quarterly. A longer period gives you more time to collect significant insights, but you still need to compare this frequently to past time periods to see if you’re seeing an uptick in turnover, or if strategies you’re using to combat employee turnover are effective.
|Calculating your employee turnover rate: Employee turnover rate = # of employees who have left during the period / Total # of employees at the beginning of the period|
Let’s look at an example:
On January 1st, you have 100 employees. As of December 31 of the same year, 10 employees have left the company. This leaves you with an annual turnover rate of 10%.
Employee turnover = 10/100 = 10%
If you’re a growing business, the total size of your workforce might change significantly over a time period. In that case, you can also use your average total number of employees each month to get a more accurate turnover rate.
Here’s the formula for this alternative approach.
|Calculating your employee turnover rate (monthly average approach): Employee turnover rate = # of employees who have left during the period / Average # of employees each month during the period|
Here’s an example using this approach:
In the last 12 months, you’ve had an average of 200 employees per month. During that time, 50 employees have left the company. This leaves you with an annual turnover rate of 25%.
Employee turnover = 50/200 = 25%
Understanding your employee turnover rate
Now that you know what your turnover rate is. What’s the optimal employee turnover rate restaurants should aim for?
The answer isn’t so straightforward, given employee turnover rates can vary widely between industries and businesses. Generally across all industries, a 10% employee turnover rate is widely considered to be good. However, this may be an unrealistic benchmark given that the average employee turnover in the U.S. was 47.2% in 2022. Especially, given that the restaurant industry tends to have higher turnover than many other industries.
When evaluating your turnover rate, consider tracking improvements over time to make sure you’re headed in the right direction. You can also aim to have more employees happy in their roles than those who want to leave—which is typically reflected in a turnover rate of less than 50%.
But taking a deeper look at the reasons employees have left your restaurant can also help you better understand your employee turnover. Despite all the talk about reducing employee turnover, not all employee departures are necessarily a cause for concern.
For example, if you had to lay off a number of staff because you increased your operational efficiency, that might be considered an acceptable reason for a higher turnover rate. Or if you had several employees move or go back to school, those departures probably aren’t a result of poor job satisfaction.
Meanwhile, if a bunch of employees quit for seemingly no reason, that may be cause for concern.
Categorizing reasons for leaving as acceptable, concerning, or even unknown can be helpful in understanding if higher turnover rates are something to be worried about.
How to reduce employee turnover in your restaurant
The restaurant industry tends to face higher rates of employee turnover. But that doesn’t mean it’s normal, nor should it be the status quo.
Here are five things you can do to improve retention and prevent employee turnover within your restaurant.
1. Have a solid hiring process
A big part of reducing employee turnover means getting the right people in the door in the first place. Although it might feel easier to just get a body on the schedule, avoid the temptation to hire the first person who comes knocking.
You could nail everything else on the employee turnover checklist. But if a candidate isn’t the right fit to begin with, they’ll be out the door sooner rather than later.
Your hiring process should carefully consider your company culture, current team, and business needs. Get the right applicants by using customized job descriptions and posting your job to relevant job boards. In a pinch? Promoting your job with paid boosts can help you hire someone faster.
2. Develop an effective onboarding process to train employees
Once you have the perfect candidate, the next step is getting them up to speed.
Joining a new team is exciting, but meeting a bunch of new faces and adapting to a new work environment is a lot to take on, so don’t just leave your new employee to fend for themselves.
Your onboarding process plays a key role in setting your new employees up for success. A successful new-hire restaurant onboarding process typically includes the following:
- Role-specific training: You’ll want to cover the basic skills and knowledge that a new hire will need to perform their job. For example, a server needs to understand how to use the POS system. Meanwhile, a cook may need specific instructions on maintaining commercial kitchen appliances.
- HR and scheduling: Take the time to review company policies, like sick days and clocking-in. You should also walk your new hire through the scheduling process, so they know when they should come into work.
- Company culture and objectives: Clearly communicate the company goals and values. This can help your employee prioritize and meet these expectations during their employment.
- Meeting the team: Having a welcoming start for a new employee not only helps them feel more comfortable, it can boost morale for your existing team as well, by having them feel involved in the process. Many restaurants also adopt a buddy system that pairs new employees with an existing staff member. This helps with building a team culture while giving new hires a safe place to ask questions along the way.
|Automate your onboarding: Hiring and onboarding tend to come with a lot of paperwork and information. Save you and your new hire time by automating your welcome packet with Homebase. Send paperwork digitally ahead of time, so you can focus on welcoming your new team member on their first day.|
Remember, onboarding doesn’t end once an employee feels comfortable doing their job. Part of keeping employees motivated and engaged is providing them with ongoing training and constant feedback—both positive and constructive.
3. Keep your compensation competitive—and pay on time
Money isn’t everything, but it sure does help pay the rent. With most of us continuing to battle inflation, good employees are often looking out for better-paying opportunities. By keeping pay competitive you’ll have a better chance of keeping your employees.
As a business owner, the thought of paying higher wages can sound daunting. However, it can pay off in spades—just ask the owner of this Pittsburg ice cream parlor. By increasing wages, the restaurant was able to reduce employee turnover and fill vacant positions, almost overnight. Plus, they noted that employees were happier and less burnt out. A positive side effect of reducing financial stress for their team.
But pay isn’t the be-all-end-all. Where possible, offering additional benefits and flexibility can also give your business a competitive edge. For example, offering early access to wages can set your restaurant apart from the rest. It’s also important to ensure you’re addressing the gender pay gap and offering equal wages for equal work.
And maybe this goes without saying, but make sure any compensation and benefits you’ve committed to get paid out on time. Your employees need to trust that their income is going to land in their pockets when they expect it. Consider using modern tools to help you make paydays easier by accurately tracking employee hours and automating payroll prep
4. Create a positive and safe workplace culture
In fast-paced restaurant environments, things like culture can often slip through the cracks. But a positive work environment is important to employee happiness, sometimes even more than compensation.
When employees actually like their workplace, they’ll feel a sense of belonging and want to stick around.
Even something as simple as building a culture of appreciation can go a long way. In fact, 46% of workers say that lack of appreciation is why they left a job.
In a restaurant environment where there are a lot of moving pieces, positive culture also includes prioritizing your employees’ health and well-being. No one wants to come to work if they feel like it puts themselves at risk. This includes having policies around proper training and safety, as well as offering sick days and other wellness benefits.
5. Make flexible scheduling a priority
The restaurant industry doesn’t work a traditional 9 to 5, which means that employee scheduling can feel a bit chaotic at times. You have to balance employee availability and business needs, but also account for the unexpected, like sick days.
The unpredictable nature of restaurant scheduling also impacts your employees. They may have other obligations, like school or family responsibilities. How you schedule your team can help them achieve a better work-life balance, so they actually want to come to work. Otherwise, you might find yourself surrounded by disgruntled employees or a toxic workplace.
Of course, it’s not always possible to craft the perfect schedule for every employee. But a little flexibility and advanced scheduling can go a long way in keeping your team happier and around longer.
|Scheduling tip: Use an all-in-one scheduling app like Homebase to streamline your scheduling. Build, edit, and share the latest schedule with your team from anywhere, use templates and auto-scheduling based on sales forecasts, and allow your team to request time-off or a change in their availability—all in one place.|
Reduce restaurant employee turnover with Homebase
Employee departures are inevitable. But with the right tools in place, you can make a difference in how long employees stay with your restaurant.
Homebase offers a robust suite of tools to help restaurant owners manage their teams—all in one place.
Set your team up for success from day one with Homebase’s automated onboarding process. With a digitized approach, new employees can receive custom welcome packets and e-sign their onboarding paperwork all within the app.
When it comes to scheduling, Homebase also gives your team maximum flexibility by optimizing schedules based on your restaurant’s sales forecasts and employee availability. Your schedules seamlessly integrate with Homebase’s automated time tracking and make payroll prep a breeze to help you avoid stress on paydays.
And of course, when you do need to bring on new folks onto your team, Homebase can help you hire better and smarter, with customizable job descriptions and easy applicant tracking.
Homebase was recognized as the best overall scheduling software for restaurants , and comes recommended as the tool every restaurant needs to reduce employee turnover and build happier, stronger teams.
Make employee turnover a thing of the past
Get Homebase, the all-in-one hiring, onboarding, and employee scheduling platform that keeps your employees happier for longer. Get started for free.
Restaurant employee turnover FAQS
What is employee turnover?
Employee turnover is the rate that employees leave your restaurant business within a period of time. It’s typically expressed as a percentage known as an employee turnover rate. Employee turnover includes employees who resign and leave voluntarily. But it also includes employees that are terminated or let go for various reasons.
While some level of employee turnover is normal, high employee turnover rates can be costly and have a negative impact on the business. Successful restaurant owners and managers should take steps to reduce employee turnover as much as possible.
How is employee turnover different in the restaurant industry?
The biggest difference when it comes to employee turnover in the restaurant industry is that it tends to be higher. Even before the pandemic, the turnover rate for the restaurant industry was averaging around 81.9% with the national average employee turnover rate being closer to 45% (in 2019.)
This isn’t entirely surprising, given that restaurant jobs tend to be higher-stress with unpredictable hours. This environment can cause burnout, causing employees to leave their jobs at faster rates. However, with the right tools and tactics, it’s still possible to minimize turnover within your restaurant team.
How can I calculate my employee turnover rate?
Employee turnover rate can be calculated by dividing the number of employees who have left by the number of employees at the beginning of the period. Most employee turnover is calculated annually, but it can also be measured for other time periods. For example, many companies also opt to measure turnover rates quarterly.
How can I reduce employee turnover in my restaurant?
There are many ways to reduce employee turnover in your restaurant. First, you need to set new hires up for success by implementing solid hiring and onboarding processes. And once your team is up and running, flexible scheduling, a positive workplace culture, and competitive compensation can keep employees coming to work happy.