DoorDash is pleased to introduce a guest blog from our Merchant Benefits partner, Sesame, which offers employees virtual & in-person access to healthcare and mental health services, with plans starting as low as $5 a month.
Health care costs for Americans are rising year after year – increasing at the fastest rate recorded in 40 years. Consumers feel these cost increases as they pay for their deductibles and insurance premiums. Employers feel this rise as they try to budget for health benefits to offer their employees.
Nowhere is this strain felt more acutely than in small and medium size businesses like restaurants. Changes in the labor market due to the COVID-19 pandemic, The Great Resignation, and the high cost of health care have dramatically affected restaurants’ ability to hire and retain talent. We’re diving into what is making costs rise, how this trend affects restaurants, and finally, what restaurants can do to adapt to these changes.
Employer Health Care Costs
Small businesses – like restaurants – are far more likely to be affected by this increase in health care spending than large employers. The Society for Human Resource Management (SHRM) reports that businesses with 50-499 employees actually saw cost growth of 9%, while larger companies reported numbers closer to 6.5%.
So, while health expenses for big companies are going up, they are going up even more for restaurants. This makes it even more difficult for these businesses to offer competitive health plans. In fact, in a report from DoorDash and Technomic, small and independent restaurants reported that the high cost of health care is the leading deterrent behind not offering health benefits. The effect of this is felt by both staff members and business owners.
Another recent survey found that nearly 9 out of 10 people who work in the restaurant industry lack paid sick days and employer-sponsored healthcare plans. Especially in light of the recent COVID-19 pandemic, employees are worried about their health and the health of their families. If restaurant owners are unable to offer health plans that alleviate these concerns, they are less likely to attract top job candidates.
According to the DoorDash report, 66% of restaurant employees are more likely to apply for a job that offers benefits than one that does not. The lack of benefits also makes it hard to retain talented team members. With employee turnover in the restaurant industry already being so high, this can negatively impact the operation of a restaurant.
What’s causing the uptick in health care prices?
There are several reasons for the rise in health care costs. The general population is aging; the US Census Bureau estimates that nearly 21% of the population will be over 65 years old in 2030. Prescription drug costs are only going up. Additionally, the COVID-19 pandemic caused many people to put off certain types of care or procedures that they are just now getting back to. This has caused a demand squeeze for health care providers and health care technology companies.
Unfortunately, the squeeze doesn’t look like it’s going to stop any time soon. A recent study conducted by Aon shows that the cost of health plans to consumers could increase by as much as 6.5% in the next year. That’s more than double the 3% increase from 2021 through 2022. This swelling of costs is projected to continue; Aon projects the average cost of these benefits to surpass $13,800 per employee in 2023.
What restaurateurs can do
While the structure and cost of our current health care system absolutely cause for concern, there are steps that small businesses can take to offer their employees affordable care and boost their talent retention.
Think of health insurance as an investment
Unfortunately, the restaurant industry has a turnover problem. A 2019 survey found that nearly 75% of restaurant employees change their jobs in a given year. Per the Impact of Benefits on Recruitment and Retention in the Restaurant Industry report, 86% of restaurant employees who are not satisfied with their job benefits are more likely to stay at their current job if benefits were improved.
Keep your valued employees in the building by offering a competitive benefits package. While the out-of-pocket costs for healthcare can seem daunting, think of these benefits as an investment in your workforce. Did you know that the average cost of replacing an employee is often one and a half to two times higher than that current employee’s salary?
In other words, it costs far more to find someone new than keep the employee already on your payroll. You may see a decrease in profit during your first year of offering employee benefits, but many restaurants have actually found that quality employee retention actually helps their restaurant increase revenue in the longer term. The more motivated and familiar your staff is, the better the dining experience is for the customer.
Offering health care benefits not only shows your employees that you care about their well-being – which can increase job satisfaction and productivity – but it can also spare you the cost of turnover down the road. For more ideas about how to retain your staff and boost employee satisfaction, check out these employee retention strategies for restaurants.
Slim down and cut food costs
Trimming down the menu – which can reduce food and operation costs – is a common strategy employed by a number of small restaurant businesses to help offset the cost of employee benefits. A food cost calculator can help you determine what you are paying for the food that’s on your menu and can give you a sense of what your most profitable (and cost-efficient) menu items are. Paring down the menu to highlight these options in your menu design, and lowering the volume and diversity of food you are bringing into your business, can help save some money that can go toward your employees' well-being.
You might also consider raising prices and getting rid of tipping in favor of a fixed gratuity fee. It’s true that regular customers may not appreciate the increase in price, but you can always be upfront about wanting to provide for your talented staff. Fixed gratuity fees can actually make the meal cheaper for the customer while providing a more stable rate of revenue for your staff. These options can not only help defray the cost of offering a competitive benefits package, they also may encourage a more collaborative and team-oriented environment in the restaurant.
Offer a high-quality basic plan
Shop around on health insurance marketplaces for a highly-rated coverage plan that works within your budget without breaking the bank. Look for a health plan that offers primary care office visits with no co-pay costs for your employees.
Wondering where to start? Sesame and DoorDash have partnered to offer DoorDash partners affordable health plans with specialists, telehealth, and mental health starting at just $5 per employee per month. You can also check out DoorDash’s Merchant Benefits for more benefits resources for small business owners.
We also recommend checking out Healthcare.gov for additional help. Their SHOP marketplace has been designed specifically for small business owners to shop for the type of employee health care coverage that fits their budget. Enrollment in their Small Business Health Operations Plan (SHOP) actually qualifies you for a tax credit that can offset the cost of premium contributions. This means that you can look for the best price on an employee health benefits package while saving yourself some money, too.
Keep your talent in the door with health care benefits
Without a doubt, the changing labor market and increasing cost of health care has put stress on restaurants. You can be a part of the solution by taking the small but crucial step of offering your staff peace of mind with a health benefits package.
Health care for your team is an investment in them and, by extension, your business. Help your restaurant do well by doing good and check out these benefits resources and our Employee Handbook Template.