What is the best way to pay restaurant employees?
Recently Bar Marco, a Pittsburgh based restaurant, announced that it will convert from a traditional pay methodology of an hourly rate plus tips to one of salary plus benefits, paid vacation, and company shares. Full-time employees will be paid a base salary of $35,000 a year and will be given health care and 500 shares in the company. Employees will be asked to work a maximum of 40 to 44 hours per week, will have two days and one night off a week, and will receive 10 paid vacation days per year. Unlike other restaurants such as New York’s Sushi Yasuda and Thomas Keller’s Per Se, Bar Marco will not be increasing menu prices to cover the cost but rather increasing revenue by expanding menu services and increasing the number of events and wine dinners they host.
Why make the move?
In my line of work I hear many restaurant owners vent their frustrations over unreliable employees and low retention rates. Here’s my assumption of how this switch could solve those issues:
1.) Lack of vested interest in the overall performance of the company. Many restaurant owners complain of theft, unreliable staff, problem employees, and high turnover. There may not be anything you can do about certain individuals but providing shares to employees can help to incentivize staff to have a vested interest in the overall performance of the company.
2.) Work is viewed as a “job” versus a “career.” Moving to a salary based compensation may help staff to see themselves as professionals. Doctors do not base their income on tips so why should a server? In great restaurants, front of the house is as intimate each menu item as the chef and can explain a cocktail as well as the bartender and vice versa. This takes study, practice, and professional development. The final result – increased customer satisfaction.
3.) Inequality. Tipping can cause head waiters at top-tier restaurants in other cities can earn from $80,000 to as much as $150,000 a year while a line cook might earn as little as $35,000 to $45,000 a year working longer hours. This may cause resentment between front of the house and back of the house. Paying everyone a salary can level the playing field and increase teamwork and collaboration.
Bar Marco’s new compensation methodology, although my increase costs in the short term, could ultimately have positive impact on the bottom line by addressing these common issues.
How should you pay restaurant employees?
Not all businesses are the same. You should thoroughly evaluate your staff, financial position, and long term goals of your restaurant before making any drastic moves. What may be good for the goose may not necessarily good for the gander but always be open to new ideas to improve your business performance.