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The restaurant industry has never been easy and it continues to be a challenging environment for those who want to succeed and make it big. Money is always an issue, as are concerns related to a restaurant’s employees. Payroll is one of a restaurant’s biggest ongoing expenses, and at the end of the month, there’s usually very little surplus cash around for “extras.” Nonetheless, although owner-sponsored health insurance is not mandatory for small restaurants, it’s an option that should be considered when you look at the overall well-being of your staff and, in turn, of your restaurant.
The Expense of Staffing a Restaurant
The National Restaurant Association notes that restaurant operators face a range of challenges associated with increased labor costs and legislative battles around hourly wages and healthcare that can weaken their bottom line. In addition, employee recruitment and retention remains a top challenge for restaurant owners. There is more competition than ever and it is therefore harder to find and keep skilled restaurant workers.
Compensation is a sensitive subject for restaurant owners. External pressures, such as market norms, vie with the internal realities of a restaurant’s budgetary needs. This can be a particularly daunting challenge when determining payment for top culinary talent (many of whom can call the shots on pay and benefits), as well as loyal kitchen and wait staff. When the salaries of your employees are added up every month, there is probably very little left over for additional benefits, like healthcare coverage. Nonetheless, despite the hefty outlay involved, owner-sponsored health insurance can make sense for restaurant owners as well as employees.
Low Wages, No Health Insurance
Job benefits have become increasingly complex for restaurants. Confusion reigns regarding the types of health coverage that must be offered to full-time and part-time restaurant employees. According to an article in The Balance, entitled, “Can Your Restaurant Afford Employee Health Insurance,” “… almost 9 out of 10 restaurant workers lack paid sick days (87.7 percent) and health insurance from their employer (89.7 percent). As a result, because workers cannot afford to take care of themselves or stay home when they are sick, two-thirds of restaurant workers (63.6 percent) are working while sick, unnecessarily placing co-workers and diners at risk.”
The current healthcare law requires employers with more than 50 full-time workers, including restaurants, to offer health benefits to employees or face penalties. This means, however, that there is no such requirement for restaurants that employ fewer than 50 people. The average cook in a large city like New York makes between $10 and $15 an hour, barely more than the minimum wage. The economics of the restaurant industry make it hard for this low wage to increase significantly; there’s a limit to how much diners will pay for food and drink and, as a result, the margins are as thin and fragile as the perfect flaky pie crust.
This means that the vast majority of people working in the restaurant industry do not have employer-funded health insurance. With the latest version of the Affordable Care Act (ACA) a work in progress, the cost of health coverage is still sizable, and most restaurants cannot afford quality health insurance coverage for their staff. And, even if a restaurant owner does offer to pay part of the cost, the premiums are still too high for someone on a restaurant worker’s salary to afford. That is why, although the restaurant industry employs over 14 million people in the United States, it has a disproportional number of under-insured or uninsured workers.
The Other Side of the Health Insurance Coin
On one hand, restaurant owners are not required by state or federal laws to pay for health benefits for their employees; on the other hand, it may be worthwhile to give at least some of your more loyal and valued employees health insurance. Although it may be a hefty expense, one of the main reasons restaurant owners offer benefits is to attract and retain workers. The restaurant industry has a notoriously high turnover rate, and many owners find that it is worthwhile to at least partially cover the costs of these benefits.
The restaurant business’s notoriously poor working conditions, which include a lack of health insurance, has led to one of the highest turnover rates of any industry and continues to have a negative impact on restaurants. Although the cost of health insurance may at first seem prohibitive, owners can’t expect to retain good talent without providing some sort of “safety net” for when illness strikes. In addition, uninsured workers have less access to preventative care so that a cough or cold can turn into pneumonia if a visit to the doctor is too expensive, or undetected high blood pressure can lead to a calamitous stroke if diagnosis is beyond one’s financial capabilities. Offering health coverage to your workers, or at least partially funding a policy, can help you maintain a high-quality, healthy staff, which benefits them, of course, but is a huge benefit to you, as well.
Medicaid: A Viable Option
Often overlooked as a solution for the restaurant industry’s health-insurance problem, Medicaid offers good coverage at a low cost to both restaurant owners and their employees. The program may have a bad “rep,” but according to surveys, there is a high level of satisfaction among Medicaid enrollees. In most states, there are no premiums for Medicaid and, just as important, no deductibles. The program also offers low-cost visits to family physicians and specialists, and excellent coverage for medications.
Because the pay scale in the restaurant industry is so low, many employees are eligible for Medicaid coverage. As a restaurant owner, it is worth your time to discuss Medicaid enrollment with your staff and explain how it is a solid alternative to other, more expensive policies that neither you nor they can afford. Help them with the enrollment process, as it can be complex, and guide them in the direction of this option, which is good for everyone involved.
The Healthcare Conundrum
Knowing how important healthcare is, it is likely that most restaurant owners would choose to offer health benefits if they could afford to. It’s a smart business decision. In an industry like hospitality, where staff turnover is notoriously high, health benefits can motivate your best employees to stick around, and when people are healthy, they can come to work and do their jobs better. Nonetheless, in the current environment, with health insurance being both expensive and not mandatory, it’s the rare small restaurant that insures its staff.
But perhaps restaurant owners have to look less at the law and more at what is the right and smart thing to do. When future restaurateurs work on a business plan for their dining establishment, before the doors open and financial realities come into play, perhaps that would be the best time to work employment health insurance into the budget – along with other non-negotiable items like monthly salaries, food costs, and equipment maintenance. Turning health insurance into an obligation, albeit not a legal one, makes contemplating its necessity less of a conundrum.
Keep Your Business Healthy
Running a successful restaurant is like operating a piece of finely tuned equipment: if any of the components are not in good working order, everything can quickly fall apart. If your employees can’t access the care they need, your business is at risk of breaking down. Simply put, healthy employees are more productive. It’s estimated that three out of four restaurants close within the first three years, and the high turnover rate in the restaurant business contributes to this factor. It’s hard enough to establish a good reputation, without having to worry about hiring and training staff on a regular basis. Providing a benefit like health insurance, means one less thing you – and your employees – have to worry about.