Workforce

Overtime costs surge for restaurants as fewer workers shoulder the workload

Employers are also finding that more hours are needed because new hires aren't as efficient.
Photograph: Shutterstock

Add another problem to the long list of restaurants’ labor woes: surging overtime expenses.

With staffs depleted by recruitment and retention difficulties, members of the smaller teams are often working more than 40 hours per week to offset the lower headcount. That entitles them to at least 1.5 times their usual wage for the hours exceeding a traditional workweek. Employers are paying 50% more for those hours than they would if another person were available to work them.

It’s a matter of fewer bodies meaning more shift time for each.

“We're paying a lot of overtime because we can't staff for all our shifts unless we pay overtime,” Michael Weinstein, CEO of multi-concept operator Ark Restaurants, said in explaining his company’s soaring labor expenses. “Our back-of-the-house kitchen employees are all working six days [a week], and they're all being paid overtime.”

At the same time, the quantum leap in infections from the omicron surge knocked many restaurant employees out of commission for days or weeks at a time, giving more work to the team members who remained healthy. The infection rate for BJ’s Restaurants increased to six times what it was during earlier surges.

In addition, many operators say their newest recruits are often unfamiliar with restaurant work and their assigned roles. Having to learn on the job, they’re less efficient than a veteran would be. The work takes more time to complete, lengthening their workdays.

“You're experiencing additional training dollars to get them up to speed, additional overtime dollars to cover more shifts than some staff may be able to [handle],” Denny’s CEO John Miller told investors in explaining his chain’s 14.8% jump in wage rates during the fourth quarter of 2021.

Randy Garutti, CEO of Shake Shack, cited the same dynamic in explaining the extra wage inflation his charge is feeling. So did Jack Hartung, CFO of Chipotle Mexican Grill. And Steve Hislop, CEO of the Chuy’s casual Tex-Mex chain, whose wage rates jumped 12.6%.

Still, Denny’s Miller said he views that situation as a positive because the extra expense should be temporary.

“Within that 14.8%, there's 0.5 to 1 [percentage] point that ultimately goes away as we get further into a seasoned staff,” Miller explained. “For the moment, it's really good from the standpoint that we are getting back to that level of staffing.”

Ark’s Weinstein agrees: “As people come back into the job market, we will not be paying these excessive overtime fees.”

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Multimedia

Exclusive Content

Financing

Podcast transcript: Dutch Bros CEO Christine Barone

A Deeper Dive: Here is the transcript for the May 29 podcast with the chief executive of the drive-thru coffee chain, who talks real estate, boba and other topics.

Financing

McDonald's value perception problem is with its lighter users

The Bottom Line: The fast-food giant took the extraordinary step of publicizing average prices this week. It was speaking to its less-frequent customers, who are a lot less likely to say the chain is a good value.

Financing

CEO pay soared last year, despite a volatile period for restaurants

Pay for CEOs at publicly traded restaurants took off last year, but remains lower than average among public companies, even as tenure for the position remains volatile.

Trending

More from our partners