Workplace Insights
June 7, 2021

Roots and Remedies of the Labor Shortage

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Signing bonuses. Interview kickers. Free food on-site. While these may sound like the latest perks of a startup, they’re actually recent hiring perks offered by several McDonald’s franchises. The demand for hourly restaurant talent has heated to such an extent that major chains are offering unprecedented perks and benefits just to get applicants

We take a look at the various causes of this shortage and ways restaurants can improve their hiring numbers for the summer.

Factors Leading to the Labor Shortage

It’s no shock that Covid is a major factor in this issue. With 5.9 million employees laid off in the restaurant industry during March and April of 2020, US unemployment skyrocketed to 14.7 percent, leaving many ex-restaurant workers desperate for income and work. But after stimulus payments, additional unemployment benefits, and recently issued tax returns, many of these same workers have found themselves able to get by, without rushing back to work. Others left the industry and found work elsewhere. Additionally, as vaccine rollout continues, there is still a clear concern about the risks of returning to a front-line position. Limited childcare options plus the childcare worker shortage have also left many unable to return to work.  

Are there other major, non-Covid factors? There are. Wage growth has significantly lagged behind company profit growth since the 2000’s. This disparity has long been a talking point of many in economics and it seems this perspective is finally having it’s time in the limelight. The demand for a $15 per hour minimum wage, which used to seem far-fetched, is now being done voluntarily by the likes of Costco, Chipotle, McDonald’s, Walmart, and others. With the delta in corporate profit growth to employee wage growth, the million dollar question is whether this labor shortage will shrink that chasm, putting more corporate profits toward salary and wage growth.

Source: New York Times

What Companies are Doing to Try and Attract Talent

As mentioned already, the big lever being pulled is wage growth. The nation’s largest restaurant chains are making headlines with higher wages and juicy bonuses. While this is realistic for the nation’s largest employers, it is not so realistic for many small or mid-sized companies. Restaurants have been hit hard for 12 straight months with severely restricted operating capacity, leaving many to apply for PPP loans and other loans just to stay afloat. Not to mention the nearly 80,000 restaurants that couldn’t make it and closed permanently. Many that survived have little to no wiggle room to bump up wages.

The results of these pushes by large employers are too early to be fully analyzed, but being that higher wages typically lead to more applications, there is a strong chance it will woo many returning workers. Unfortunately, many restaurants don’t have this luxury of being able to afford wage increases.

Why Branch is the Ideal Payments Solution During the Labor Shortage

We’ve talked extensively about increasing pay rates. But what about changing how employees are paid. Bear with me on this one, I know it may sound trivial.

In a December 2020 Branch survey of hourly workers, respondents cited on-demand pay as their second most desired benefit after bonus pay. However, why many organizations have been hesitant to adopt on-demand pay is understandable. Done independently, it can cut into a restaurant’s cash flow, force payroll to process more checks to employees, and disrupts a non-daily pay cycle that has existed before baseball was America’s game. These changes are time intensive, costly, and disruptive in a long regimented system. 

That’s where Branch comes in to change the game.

Let’s break down each of the three traditional drawbacks and why implementing Branch’s same-day pay and faster payments remove these difficulties.

1. Improves cash flow

Instead of the employer fronting the funds upfront to pay employees early, Branch does. We provide employees with access to up to 50 percent of their earned wages instantly, at no cost to the employer or employee. That means companies can keep their traditional cash flow patterns while still providing on-demand pay. 

By integrating with your existing systems, we can see how much an employee has earned and front the money once requested by the employee via the Branch app. When payday rolls around, the employer processes payroll like normal and Branch is automatically reimbursed. The employee does not have to remember to pay back the amount, which means they never get hit with late fees or interest, like that of payday loan lenders. So, company cash flow stays the same and employees get a top benefit.

2. Free to implement

Issuing paper checks can cost employers anywhere from $1 to $26 per check. So why would any employer want to increase that spend by having to issue checks more frequently? Good news, again. With Branch, we provide your employees with a no-fee Branch Wallet, which also has no fees to the employer. Workers can get all their payments—wages, tips, mileage, and more—directly to their wallet and the fee-free Branch debit card, which they can also view, manage, and access via the Branch app. The payroll team can save funds on issuing paper checks and employees can get earned wages and reimbursements instantly via the power of Branch.

3. Simplicity of change

Change can be tough, especially when it is a long entrenched process. Knowing that, we built out an implementation process that gets done quickly and causes no headaches or painful process changes. Each client gets a dedicated Customer Success Manager that walks them through on-boarding, launch, and post-launch.

If baseball, America’s game, changed their extra innings rule this year after nearly 150 years, so too can companies with their method of paying out employees. These simple implementations can result in happier employees that stay longer as well as more job applicants wanting to fill positions.

Improving Hiring This Summer

The labor shortage has been hard on restaurants, an industry that was already having an unprecedented year. While there is no silver bullet to flip this issue upside down, there is a quiver of arrows that can be utilized in tandem to help. Branch can be one of those arrows and we are happy to help restaurants aim and fire that arrow to help get them closer to the bullseye of staffing a team that serves wonderful food to their loyal customers.

Join us for a live lunch and learn on June 29th as we share additional insight into the hiring shortage and how Branch can help.

Learn more about how Branch works with restaurants to improve the employee experience.

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