Supporting Financial Flexibility amid Restaurant Reopenings
4 Min Read By Jeanniey Walden
The restaurant industry is starting to see a glimmer of hope when it comes to hiring. With more than 40 million Americans filing for unemployment, COVID-19 took a significant toll on the workforce. But as businesses start to reopen and cope with the new normal, we’re seeing a hopeful shift. 2.5 million jobs were added to the economy in May, and data collected by DailyPay shows that the quick service restaurant (QSR) industry saw a 32 percent increase in hiring over the past month (May 18 to July 12).
But as these positions begin to open up, employers will face challenges as many businesses compete for talent at the same time — not to mention that some employees are opting to hold onto unemployment benefits, which may offer more compensation than their previous jobs.
How is the industry moving forward?
In a time when finances are top-of-mind for most everyone, it’s imperative employers properly compensate workers with benefits like financial flexibility.
DailyPay’s latest data shows that QSR hiring has gone up 32 percent in the last two months. What does this tell us about the industry moving forward?
The fate of the fast food industry is still up in the air. However, based on our Rehire Index, all signs are pointing toward fast food restaurants holding onto the boom in business they experienced during COVID-19.
That said, various factors will impact the industry’s future. Despite the current growth in sales, QSRs may still suffer financially once dine-in restaurants return to normal operations. Many restaurants have been forced to accelerate digitization efforts to keep business running and are slowly catching up to QSRs. Creative adaptations such as online reservations, third party delivery options, robot servers, paperless menus, digital wallets and on-demand pay for employees are just a few of the digital transformations that restaurants have adopted in the past couple months.\
How can employers attract workers?
Since unemployment benefits can sometimes offer better pay than the jobs these workers previously held, what tactics can QSR managers use to attract workers?
In a recent survey, as many as 75 percent of hourly workers did not return to work when they received offers to resume their previous position. With one in four workers furloughed and two out of three laid-off, employees needed to make tough decisions to support their families. In some cases, this meant remaining unemployed to access the supplemental benefit as long as possible. In other cases it meant finding other work.
As we return to work, companies need a concrete plan to support their employees’ financial security. This can include on-demand pay, hazard pay or layoff protection to entice new employees and show that they’re financially taken care of.
Why is financial flexibility for employees so important, and how can employers help?
Financial flexibility like on-demand pay gives employees more control over their lives and those close to them. In fact, we have seen a 30 percent increase in DailyPay usage among families as work starts to resume. For some families, on-demand pay is their lifeline. The ability to access earned income earlier than the standard biweekly pay period can provide the financial bridge families need to cover emergency expenses, bills and crucial supplies needed during the pandemic . Early access to earned pay also strengthens the employee-employer relationship and increases productivity. According to a recent study of ours, 49 percent of users said their earnings increased by more than 10 percent after leveraging on-demand pay, demonstrating that on-demand pay motivates employees to pick up more shifts. As the data shows, a positive pay experience rewards both the employer and employee.
Why does the QSR Industry specifically benefit from on-demand pay?
The QSR industry is known for having high turnover rates and the numbers have been steadily increasing. In 2019, the overall turnover rate in the restaurant sector was about 78.6 percent. However, some QSRs face even more daunting numbers; Panera Bread loses close to 100 percent of its employees yearly.
The fact that these statistics are the industry’s norm is a major problem. High turnover rates translate to high employment and training costs, as well as a decrease in productivity. The Center for Hospitality Research at Cornell University estimates that turnover costs approximately $5,864 per person. Turnover cost can be attributed to lack of engagement, recruiting and selection processes, orientation, training and productivity loss for all staff.
On-demand pay not only yields major retention and recruiting benefits, but also establishes an invaluable relationship between employee and employer — creating heightened engagement and cost savings across a QSR’s business.
Why does our current pay system not work? What needs to change?
The advancement of technology has greatly accelerated almost every industry. Just as banks have online accounts and ATMs, restaurants have self-service kiosks and online delivery services. Many service providers have adapted to instantly meet the demands and needs of consumers — but not their employees.
The payroll system is literally stuck in the past: The two-week pay cycle was created by companies after World War II for tax benefits and has stayed much the same since. But COVID-19 showed us that this cadence does not protect employees. Many are left to financially fend for themselves as they wait for their next paycheck. And emergencies aside, employees want instant access to their earned pay simply for their own peace of mind. With Millennials and Gen Z making up the majority of the workforce in the next few years, the desire for instant access comes at no surprise. Younger generations use quick and responsive services every day, and now expect the same ease and convenience from their employers. According to our own research, 44 percent of millennials care about the speed of their pay. Companies must adopt a quick and seamless pay experience as these expectations continue to grow, or risk losing employees to the competition.