The latest People Report Workforce Index, a quarterly barometer of market pressures on restaurant employment, has risen to its highest level since the third quarter of 2007, meaning restaurant operators see a tougher environment ahead for recruitment and retention.
Data from the third quarter People Report Workforce Index, which surveys restaurant human resources departments and recruiters on the state of employment trends, shows continued industry job growth, but high levels of recruiting difficulty, a rise in vacancies and turnover are beginning to increase.
“The recruiters are the ones that are telling us it’s getting tougher,” Joni Doolin, founder of the People Report, said. “They are surfing through hundreds of applicants for positions, but they are telling us that it is becoming progressively more difficult to find the right people with the right skill set.”
The Workforce Index measures from a baseline value of 50, with results over that level indicating increased pressures on the five components: employment levels, recruiting difficulty, vacancies, employment expectations and turnover.
The overall third-quarter reading rose to 67.7, an increase of 3.6 points over the prior quarter and 5.9 points above the same quarter a year ago. Compared to the fourth quarter of 2010, the increase was 12.9 points.
The Workforce Index showed that over the last 12 months, the restaurant industry has created 185,000 jobs, the highest 12-month total since December 2007. The majority of companies surveyed for the People Report data added hourly workers and maintained management employee levels. Just 2 percent made reductions to hourly workers and 10 percent made reductions to management positions.
The index also found that turnover rates were increasing, with 40 percent of companies experiencing rising turnover rates at the hourly level, up from 31 percent in the previous quarter.
“The thing that everyone needs to be aware of — and what a lot of operators worry about — is turnover,” Michael Harms, a senior business analyst for the People Report, said. “Turnover is, of course, costly and painful for most companies. It’s a lagging indicator.”
Industrywide, the Workforce Index’s turnover number rose to 52.6 in the third quarter, up from 46.9 in the second quarter report. People Report executives said the turnover number had seen record lows in the past three years.
“Right now, we are just seeing turnover start to rise,” Harms said. “But we’ve seen these variables start to rise for six to nine months, pretty significantly. What we can expect in the months ahead is to see turnover start to follow that same trend line up. People need to be aware of that instead of playing catch-up.”
In separate data prepared for the Council of Hotel and Restaurant Trainers conference earlier this month, the People Report found 33 percent of hourly employees are on the job less than three months, and another 18 percent are on the job less than six months.
“If that churn in the early tenure is high, it’s costing you a lot of money,” Doolin said.
The Workforce Index vacancy number also trended upward, to 59.7 in the third quarter from 53.4 in the second quarter. The report’s index for vacancies has seen a 13-point jump since last year.
“We are coming out of a period where the focus has been so intense on managing costs and saving our way through a recession, we have eked out just about every productivity gain that we are going to get,” Doolin said. “And now the question for operators, as they have to add staff, is how they balance that as the employment market improves.”
— Ron Ruggless