Managing the Staffing Crunch

The hospitality sector has been facing a staffing crisis for over three years now, and this shortage of workers, along with an increasing National Living Wage, has been driving up payroll costs. This strain on business’ cost base will only be amplified by the Autumn Statement announcement that the National Living Wage will increase by a further 9.8%, which equates to over £1,800 a year for a full-time worker over the age of 21.

To retain staff, minimise churn and optimise cost structures, businesses are having to consider each cost line in their profit and loss account and be inventive in their approach to retention.

Recent years have seen a shift in the sector in terms of the wellbeing and benefits offered to employees. A strong package in this area can help attract and retain the best employees. When implanting benefits packages its important to consider who will cover the tax on these. One option is ‘payrolling’ whereby the employee is taxed each month on the value of their benefits. This reduces the cost to the employer but is naturally less attractive to the employee.

An underused benefit is the use of pension salary exchange. Businesses may wish to explore this as an option for their higher paid workers who make pension contributions. Employee pension contributions are typically deducted after net pay, but for an employee who commits to pension salary exchange, their salary is reduced by an amount equivalent to their pension contributions and their employer pays the total contribution into the pension as an employer-only contribution. This results in savings to the employer and the employee on national insurance as the employee’s salary is lower. Employers could opt to share their part of these savings with the employee or retain these within the business. Once a pension salary exchange scheme is set up, it is a straightforward process each month to maintain. A scheme like this can bring great benefits, with the only significant pitfall being the need to ensure that wages do not fall below the national minimum wage threshold.

Looking beyond employee benefits, we are starting to see an increase in the use of technology to reduce costs. In the world of quick service restaurants, businesses that have to date not utilised self-service kiosks may wish to reconsider installing these. Not only do they allow a site to operate with reduced employees, but it is also reported that average orders are increased by up to 20% when ordering through this method than with traditional cashiers. The kiosks require an initial cash investment but should save on payroll costs in the long run. The extension to capital allowances rules announced in the Autumn Statement could allow those business who are tax paying to offset the investment against their corporation tax bill.

Given the levels of inflation we have seen, the cost of food and beverage is high on the list of every management team. This has led to an uptake in businesses employing a dedicated procurement officer to negotiate with suppliers, or for smaller business employing a contractor to support in this area. Although procurement can be heavy on management time and effort, the costs savings that can be achieved in the area can be substantial and it is well worth exploring if it is something yet to be considered.

During the pandemic a lot of businesses went through menu reviews to reduce the number of options available to customers to streamline kitchens however, in many cases the menu options removed have been reintroduced. If costs are particularly tight this maybe an area to reassess as it can reduce food waste and have environmental benefits.

Looking to the future, it is hard to predict when cost pressures will begin to subside. It is therefore essential that businesses continue to be proactive, respond quickly to changes in the operational environment and challenge themselves constantly on operational efficiency. Otherwise, there is a risk of high levels of continued closures within the hospitality industry (particularly for independent restaurant groups), fewer site openings and new brands. All of which may mean stifled growth in 2024 and perhaps beyond.