Restaurants consider higher pay, new wage models to attract workers

Good Business Colorado offers free financial planning tool for businesses

By: - August 31, 2021 5:00 am

A waitress waits to deliver drink orders at a Denver brewery on Jan. 7, 2021. (Moe Clark/ Colorado Newsline)

After 20 years working in the restaurant industry, Cliff Blauvelt is ready to start his own business: Bodega Denver, a fast-casual establishment specializing in sandwiches.

If all goes well, the business will open in March 2022 — two years after COVID-19 sent shock waves through Colorado’s restaurant industry as businesses were forced to close and, millions of relief dollars and many months later, grapple with the pandemic’s consequences.

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“I’ve always thought of restaurants as definitely like a home,” Blauvelt said. “It’s been a place for a lot of people (where) they’ve found good jobs and been a part of something bigger.”

But after COVID-19 upended the industry, entrepreneurs like Blauvelt are taking a critical eye to pay structures that have long been ubiquitous.

Blauvelt wants to run his bodega “the right way.” To him, that means helping workers find a home in the industry while ensuring “people are getting paid well, and people do want to come to work, and people are really proud of what they’re doing.”

Colorado restaurants still short workers

Restaurants have had to navigate frequent health risks, revenue losses and policy changes throughout the COVID-19 pandemic. One challenge that’s persisted for many businesses in the last several months since governments lifted capacity restrictions: finding enough workers to host, cook, serve and wash dishes for hungry customers.

By the end of June, Colorado’s restaurant industry was still down almost 11,000 workers compared with pre-pandemic levels, according to data from the Bureau of Labor Statistics and referenced in a recent report from the Colorado Restaurant Association.

Nine out of 10 restaurants the association surveyed in July and August said they’ve “changed business practices or wage rates to increase hiring and retention,” with 1 out of 4 offering retention or hiring bonuses, according to the report. All of the survey respondents said operational overhead increased “significantly” since the onset of the pandemic in March 2020, with 80% ranking increased labor costs as the biggest driving factor.

In Colorado, the minimum wage in 2021 is $12.32 an hour. Tipped employees can be paid no less than $9.30 an hour. Typically, “front-of-house” workers such as servers and hostesses, who are more likely to receive tips, end up earning more than the “back-of-house” restaurant staff, who include cooks and dishwashers, according to industry experts.

An unscientific review by Newsline of recent front-of-house restaurant job openings on the state’s official job board, Connecting Colorado, found positions advertising an hourly pay between $13 and $14 on average, plus tips. Meanwhile, back-of-house jobs posted recently on Connecting Colorado advertised an hourly pay between $17 and $18, on average.

“The labor shortage has only gotten worse since this spring,” Denise Mickelson, spokesperson for the Colorado Restaurant Association, said in an email.

“In April,” Mickelson added, “more than 90% of restaurants reported struggling to hire enough staff, and this month, that number increased to more than 91%.”

Colorado restaurants who responded to the association’s survey reported increasing their workers’ wages by an average of 19% since March 2020. About a third of restaurants said they’d increased wages by 21 to 30%, while more than 1 in 10 restaurants had increased wages by 31 to 40%.

In April ... more than 90% of restaurants reported struggling to hire enough staff, and this month, that number increased to more than 91%.

– Denise Mickelson, of the Colorado Restaurant Association

A common argument from fiscal conservatives is that generous pandemic-era unemployment benefits motivate people to stay at home when they might otherwise be filling job openings at restaurants, bars and breweries. Robert Bogatin, director of Good Business Colorado’s Resilient Restaurants initiative, thinks the reality is more complicated.

“At the end of the day, the biggest reason why people are not going back to work in restaurants is because the food service industry does not provide an adequate work environment,” and there are “other alternatives that do not come with the drama and stresses of food service,” Bogatin said.

Blauvelt agrees.

“People had time off, and I think … they’ve been finding these other jobs, they found a lot more stability, they found insurance, they found a 9-to-5, they found normal hours — they found just what seems to be more of a normal sort of common lifestyle,” he said, noting that he has heard from some friends who switched careers that they’re starting to miss the fast-paced restaurant environment.

Tool allows restaurants to reexamine how they pay workers

One belief shared by the entrepreneurs and business owners who are part of the Resilient Restaurants initiative, Bogatin said, is the idea that “a lot of the broken aspects of the industry can be linked to the basic wage and compensation model.” In a traditional wage model, tipped servers and bartenders could make twice as much money as the cooks and dishwashers working 40 hours a week in the same restaurant.

Bogatin believes that fundamental inequity, coupled with the lack of benefits for restaurant workers, is driving hiring difficulties.

A new tool from Resilient Restaurants — dubbed the ReHire with Resilience Payroll Calculator and Wage Model Assessment Tool — aims to make it easy for restaurants to pay staff more fairly and help them attract and retain workers.

Up to 150 food service businesses can apply through Good Business Colorado and submit their current payroll to receive a free report from the ReHire with Resilience tool, as well as a free consulting session. A Spanish version of the program also recently launched, providing the same services in Spanish.

People dine at a restaurant on Pearl Street in Boulder on Aug. 14, 2021. (Quentin Young/Colorado Newsline)

The payroll calculator and wage model tool produces three alternative wage models based on a restaurant’s current payroll data: a full-house service charge, back-of-house and benefits service charge, and full-house tip pool.

With a service charge on behalf all restaurant staff (full house) or kitchen staff (back of house), “you charge a fee that’s on the ticket, and it’s not related to menu pricing and it’s not a gratuity,” Bogatin explained, whereas a tip pool means “you make adjustments to your base wages for everybody” based on tips.

“Tip pooling and service charges generally are used so that you can … equalize the income between your kitchen and front-of-house staff,” Bogatin said. “One of the biggest concerns is, kitchen people need to get paid more money, and those models are the quickest way to arrive at redistributing the money coming into your business and getting everybody paid equitably.” Service charges can also go toward benefits such as health insurance.

Resilient Restaurants can help restaurants tweak those wage models further based on a business’s individual needs — such as a tiered pay structure based on seniority, for example.

Blauvelt signed up for the Rehire with Resilience tool and spoke with Bogatin about implementing a wage model to ensure that his non-public-facing workers are paid on par with tipped wait staff, “all the way down to dishwashers.”

“You know, it’s a very hard job,” Blauvelt said of those workers. “And it’s hard to believe that these guys are the very bottom of the totem pole where without them, these restaurants wouldn’t really run.”

Blauvelt plans to implement a 5% service charge at Bodega Denver.

“That would go straight to benefits,” he said, “as far as health insurance and things like that, to be able to offer paid time off — to take care of the employees and give them those things without being a big burden on them as well.”

Zev Grauer worked in the restaurant industry for more than 10 years before he took a pay cut for a more stable job in beer distribution, which lets him spend more time with his family. But Grauer recently started serving and bartending again on the weekends at the Boathouse Cantina in Salida.

“Honestly, I missed the people,” Grauer said. “I missed the hustle and bustle. My current job, I’m remote — and I love my job, but I don’t get out of my house.”

Grauer is skeptical about using a tip pool for the entire restaurant, pointing out that it may disincentivize people to serve, since those workers have to deal with angry customers and typically get paid more as a reflection of that. But he thinks a small service charge to offer employee benefits might be a good way to attract workers, depending on whether customers are willing to pay a little more.

“The biggest hurdle for labor shortage in the industry right now is benefits,” Grauer said. “It’s tough to work somewhere and not be able to take the time off, and literally not being able to afford being sick because you can’t afford the bills.”

A bartender friend who recently needed an appendectomy is now more than $30,000 in the hole.

“He makes good money at the bar,” Grauer said, “but that’s all gone now for a three-day stay at the hospital.”

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Faith Miller
Faith Miller

Reporter Faith Miller covers the Colorado Legislature, immigration and other stories for Colorado Newsline.

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