Employee Benefits for Restaurant Owners: Think creatively!
Restaurants have revolving doors when it comes to keeping staff. And it’s incredibly difficult to find reliable, experienced staff, chefs and managers. Add tight profit margins and finicky customers to the mix and it’s no wonder many owners don’t think they can offer health care and other benefits to their employees.
We talked with David Woodring, Benefits Advisor for McInnes Group, Inc., a benefit advisory firm. David focuses on the hospitality, restaurant and entertainment industries, and talks about how restaurant owners can offer benefits creatively.
Mize Houser: “David, is there a misperception that it’s just too expensive or complicated to offer benefits to restaurant employees?”
David: “It’s not a misperception – it’s true. Group insurance benefits are expensive, but there are ways owners can be very creative with benefit plans to fit their budgets.”
Mize Houser: “What ideas do you have?”
David: “In the past, group insurance carriers required higher contribution and participation levels, but that’s no longer the case. Many major benefit insurance carriers no longer have minimum employer premium contribution requirements and/or minimum employee participation requirements for smaller operations (those with 50 or fewer full-time plus full-time equivalent employees).
Today, restaurants can implement group insurance benefits that are entirely voluntary (employees pay the premiums). And premiums for group health insurance are often less expensive than the premium for a comparable individual health insurance policy, unless the employee can get individual coverage and receive premium credits “subsidies” under the Affordable Care Act (ACA).
Another popular idea is to set up a cafeteria plan under IRS Section 125 POP plan (sometimes called a “Premium Only Plan”) so employee premiums can be deducted before federal and state income taxes as well as FICA/Medicare withholding. On average, total employee tax savings can be as much as 30% on premiums paid through the plan, and the employer also saves 7.65% on FICA/Medicare payroll taxes.
Mize Houser: “What should a restaurant owner plan to budget for benefits?”
David: “In my experience, restaurants offering employer sponsored group insurance benefits should budget $200 to $400 for each eligible employee per month for benefits. Of course, there are other factors that impact the budget like the quality of the group health insurance coverage; and whether ancillary employer sponsored group insurance benefits like dental, vision, life, short/long term disability; or work-site cash reimbursement insurance like AFLAC are offered.
I have one restaurant client who offers 401(k) plans to full-time, eligible employees with a vesting schedule that entices them to stay with the restaurant. Adding the cost of an employer sponsored 401(k) plan can increase the monthly benefits budget to $500 or more per employee, but it can more than offset the costs associated with losing and having to replace employees.”
Mize Houser: “What advice would you give to owners to think differently about benefits?”
David: “I tell restaurant owners to ask their employees which benefits are important to them. You can be creative with your planning by offering voluntary (employee paid) group insurance benefits which can create the perception that employees are receiving a valued benefit, even though the employer is only paying a small administrative cost to offer benefits. Other restaurant owners offer pet insurance, work-site cash reimbursement benefits such as hospitalization and accident policies with carriers like AFLAC. Even providing bus passes or a monthly transportation allowance can be great benefits too.”
Mize Houser: “David, what trends are you seeing in the industry related to offering benefits?”
David: “Hiring and keeping a younger workforce is a big challenge. You must think differently about what you can do to attract and retain younger workers. And some of the ideas won’t eat up your cash flow. A few ideas that my restaurant clients are using are:
- Schedule flexibility – try to be as accommodating as you can with work schedules
- Offer free or discounted meals
- Use contests or award programs to recognize employees who achieve high sales, push a new menu item, etc.
- Offer direct deposit so employees are paid quicker
- Offer a student loan or tuition reimbursement program
- Give employees regular feedback. Employees want to know if they are doing a good job or if they need to improve on a specific part of their job
- Reimburse or provide help with cell phones. Many managers use their personal cell phones on the business premises so why not help them with the bill?
Mize Houser: “So, David, what advice would you give to an owner who is looking for a benefits provider?
David: “Just like when you’re looking for a CPA, banker or attorney, you want a professional who understands your industry. Ask if the consultant works with restaurants and what size restaurants. How available are they to answer questions or help with a problem? If you intend to grow your restaurant to 50 or more employees, is the benefits consultant experienced with plans to accommodate your growth? Will you need other products like property or casualty insurance, 401(k) plans or estate planning? It can be easier if you can work with one provider who can manage many of your needs.”
Mize Houser: “Those are great ideas, David. Thank you for giving our readers helpful tips on employee benefit plans.”
You can reach David at the McInnes Group, Inc. or 913.831.0999.
