It’s been quite a rollercoaster ride for the hospitality industry in recent years. From a quick adjustment to drive-thru and delivery that accelerated business and profits early in the pandemic, to the big resignation that leaves restaurants with bleeding workers and constant staff shortages, management has struggled to keep up .
Adding to the never-ending struggles, restaurants — particularly quick-service locations — are now facing soaring cost increases for ingredients and consumables coupled with a slowdown in business as consumers become more frugal amid rising inflation. Also, restaurants must deal with significant administrative issues, including the need to offer insurance for their employees or face aggressive IRS action for failing to comply with Affordable Care Act (ACA) requirements.
The health riddle
While offering health insurance and other benefits is a requirement for most restaurants, many have traditionally viewed it as a costly and time-consuming proposition that results in minimal return. For many restaurant workers, hourly wage is the number one consideration when taking or staying at their job. The added expense they would incur for health insurance hits their weekly paychecks too hard, so many just don’t take advantage of them, even when they’re offered. In fact, according to the Bureau of Labor Statistics, only about 32 percent of hospitality workers have health insurance, compared to more than three-quarters of workers in other private sector jobs.
In addition to cost, there are factors that keep this percentage low. Many restaurant workers may already be covered by Medicaid and state exchanges, or receive other health care grants. And restaurant management often struggles to communicate the availability of these benefits to a dispersed workforce that may not have internet access or an email address, who may not be fluent in English and are more likely to use prepaid phones.
Administrative challenges also impact restaurants’ ability to effectively provide insurance and benefits. Many restaurant owners still rely on legacy systems or need to implement new systems to track eligibility and enrollments and maintain ACA compliance.
Get creative with benefits to hire and retain employees
The ACA requires most restaurant owners and operators to offer health insurance to their employees, regardless of whether they use the benefit. In today’s post-COVID world, many restaurant owners have discovered that traditional health plans are at least a prerequisite for encouraging managers to stay. But in an effort to keep up with hiring and minimize turnover, they’re also getting more creative in the types of benefits they offer to all employees across the board.
In addition to basic health insurance offerings, more and more restaurants are adding lower-cost options that appeal to all levels of employees. These options include vision and dental care that may not be part of their other health care; and optional benefits such as disability, catastrophe, and life insurance. Other differentiating programs may include family or elder care leave, flexible salary plans, flexible scheduling, financial planning assistance, and help with paying for education.
Chipotle, for example, takes this approach to minimize turnover in its ranks. The chain offers a debt-free education program that has resulted in a 3.5x higher retention rate for program participants. Chipotle also offers a health concierge for all of its employees and their families to help them access mental health resources and telemedicine appointments, and provides additional services for those enrolled in the company-sponsored health plan.
make services affordable
While potentially more cost-effective than traditional healthcare, these creative benefits aimed at improving employee recruitment and retention still come at a price. With prices soaring across the board and business collapsing amid the aftermath of the pandemic, how can restaurants afford to implement these programs?
There are a number of tax credit programs that restaurants may be missing out on. And the resulting savings could ultimately help fund new employee programs. If you’re not already claiming tax credits, consider the following prominent programs:
Employee Retention Credit (ERC) – A refundable federal tax credit against the employer’s contribution to Social Security tax equal to 70 percent of qualifying wages paid to employees from December 31, 2020 through June 30, 2021. Qualifying wages are capped at $10,000 per employee per calendar quarter in 2021. To qualify, restaurants would have to close during this period due to government orders restricting commerce, travel, or group gatherings due to COVID-19, or a decline in gross receipts have experienced a complete or partial cessation of operations in any calendar quarter in 2021 if gross receipts for that calendar quarter are less than 80% of gross receipts for the same calendar quarter in 2019.
Work Opportunity Tax Credit (WOTC) – A federal tax credit available to employers for hiring people from certain target groups, including those receiving state aid or meal stamps, veterans and ex-offenders who have consistently faced significant employment barriers. The credit is made against the employer’s share of social security tax.
FICA Tip Credit – A tax credit available to certain food and beverage establishments that allows them to claim a credit for Social Security and Medicare taxes paid or accrued on tips provided by certain employees. This loan reduces the amount of federal revenue. Unused credits can be carried forward for up to 20 years until they are fully used.
Disaster Zone Credit – These federal tax credits are available to employers affected by qualifying disasters such as wildfires, hurricanes, floods and the COVID-19 pandemic. The credit amount is equal to 40 percent of the qualifying wages paid to each eligible employee, up to $6,000, making the maximum total credit available per eligible employee $2,400.
Restaurants may feel they can’t afford to offer basic health insurance, let alone other benefits, which may be exactly what prospective and existing employees want. But with a little creativity and using tax credits to which they’re entitled, restaurants can better position themselves to weather the Great Retirement and receive the perks needed to attract and retain their employees.
Derek Moore is Senior Vice President of Employee Benefits at Venbrook Insurance Services.