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Recovery Sign: Hold the Fries! Salaries Up at Chain Restaurants 
 

4/26/2011  By Stephen Miller, CEBS 
 
 

The U.S. chain restaurant industry, noted for its high turnover of hourly workers and tight profit margins, is lifting the salary increase freeze that took hold during the 2008-09 recession, according to a survey by management consulting firm Hay Group and the Chain Restaurant Compensation Association (CRCA).

According to Tom McMullen, vice president and North American reward practice leader of Hay Group, “It is comforting to see that chain restaurant companies are planning to provide base salary increases this year. The restaurant industry was hit extremely hard during the recession, and this data shows that chain restaurants have the resources to invest in increasing the base salaries of their staff. Sales and profit have been improving in the industry and, while salary growth has been modest the past couple of years, organizations are feeling more confident in increasing their fixed labor costs.”

According to the Hay Group/CRCA survey, which was conducted in December 2010 and gathered 2011 budget information:

The median projected increase budget for U.S. chain restaurants is 3 percent for all employee groups.

The restaurant industry is on par with general industry projections for 2011, which are 2.8 percent, on average.

The study shows a significant jump in salary increase budgets for 2011 over 2010: approximately 30 percent of chain restaurant participants had reported a freeze for 2010, bringing the median budget down to 2 percent, which included organizations not providing increases.

Retention Concerns

“Companies are increasingly worried about retention within the restaurant sector,” said McMullen. “During the economic recession we asked more of our people—more hours, heavier workloads—while at the same time reducing or eliminating performance-based pay increases. Now that the economics and financials are improving, the industry recognizes the need to reinvest in our people and send a clear message that we appreciate their hard work and loyalty.”

Base pay increases, he added, “send a message that we care about our people and value the investment that they have made with their organization.” This is especially important for hourly employees who have been struggling at the lower end of the wage scale. “Now, more than ever, we need an energized and motivated workforce to service our customers and drive our sales growth,” he noted.

McMullen concluded, “After three very difficult years for this industry, including pay cuts, layoffs, benefits reductions and limited pay increases, restaurant organizations recognize that they need to re-engage their workforce"—an observation that could apply to all recovering sectors of the economy.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles:

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Final FLSA Rule Provides Guidance on Tip Credit Notice, SHRM Online Legal Issues, April 2011

Salary Increase Budgets Improve in 2011, SHRM Online Compensation Discipline, March 2011

Higher Wage Gains Likely, SHRM Online Compensation Discipline, March 2011

Companies Expect Continued Hiring in April 2011, SHRM Online Staffing Management Discipline, March 2011

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