Restaurants Can Expect Labor Pains, Liquor, Wage and Hour Exposures in 2024

restaurant labor pains 2024 wage and hour exposures bartender cocktail
Restaurant labor pains 2024 wage and hour exposures bartender cocktail
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The pandemic-era turbulence largely behind it, the nation’s restaurant industry can look forward to shaking off many of the remaining after effects in 2024.

There are, however, some significant “ifs” to that prediction, given persistent risks that may make the going tough for many.

It’s not just the economy’s ups and downs, and the impact of inflation on costs and profitability. The labor shortage continues to drag operations down.

Mounting litigation under dram shop laws demands a response by operators. And effectively managing the intricacies of changing minimum wage requirements is another challenge.

  • Simplot Frozen Avocado
  • RATIONAL USA
  • McKee Foodservice
  • Imperial Dade
  • BelGioioso Burrata
  • T&S Brass Eversteel Pre-Rinse Units
  • Inline Plastics Safe-T-Chef
  • Day & Nite
  • RAK Porcelain
  • DAVO Sales Tax
  • AyrKing Mixstir

Strict attention to risk mitigation strategies will continue to be the rule in 2024. Here are some risks to be ready for.

The high cost of the labor shortages

The industry continues to have an overall labor deficit compared to pre-pandemic levels, in October falling 14,000 jobs short of the February, 2020 level.

The full-service segment and cafeterias/grill buffets and buffets have the longest way back; quick service, fast casual and bars and taverns have surpassed the pre-pandemic peak.

It’s a concern for hospitality overall.

Nearly three-fourths of the Industry executives surveyed in the HUB International 2024 Outlook Executive Survey said it has affected their business’ vitality and has driven over half to sharpen their focus on employee recruiting. 

The situation also argues for a sharpened focus on the quality employee experience that employers provide – particularly through personalized benefits that speak to the individual’s needs and wants.

Older workers might prioritize prescription drug benefits and a robust retirement plan.

Younger employees might be less interested in a comprehensive health plan, but more interested in telehealth and mental health counseling services.

And speaking of which, offering wellness benefits will go a long way, especially those covering mental health given the industry’s high number of mental stress claims.

It’s led many employers to improve their employee assistance programs that provide these services; some larger groups have even added a therapist to the staff

And well-being benefits do make a difference, reducing recruiting costs and sick days taken and promoting employee satisfaction.  

Rising liquor liability and other risks

The costs of violating dram shop laws are mushrooming as litigation leads to nuclear verdicts. One Miami bar alone was ordered to pay a whopping $95 million for damages stemming from a drunk driving incident.

It’s created a big problem continuing into 2024 for establishments that serve. On one hand, it’s never been more important to have adequate liquor liability insurance.

But on the other? It’s hard to get and very costly.

One South Carolina bar owner reported that his liquor liability costs skyrocketed from $5,000 to $60,000 in only three years. It should encourage management to tighten its practices in 2024.

That includes fine-tuning and documenting policies and training that promote best practices to avert over-serving, but also ensuring conflict resolution is part of the package.

Another potential stumbling block into 2024 is the risk of wage and hour violations as higher minimum wage requirements – with their attendant complications – take effect.

Management must step carefully to avoid some of the concerns, like maintaining a fair pay gap between more experienced staff and minimum wage employees, and compensating fairly for tipped versus non-tipped work. 

One of the impacts will be on employment practices liability insurance in 2024.

Insurers are adding wage and hour exclusions to policies and reducing limits in response to class-action litigation filed by servers and other front-of-house staff. 

Getting houses in order

Whatever their size or structure, restaurant organizations should consult a broker before renewals.

Doing so shows underwriters their commitment to managing risk reduction through plans for mitigating potential exposures.

It is an effective way to secure coverage at the best terms and prices. 

3 things to think about as 2024 approaches:

  1. Lean into risk
    – thoughtfully. Factors like high interest rates and nuclear verdicts make insurance more expensive. Alternative insurance vehicles like captives can provide access to insurance capacity. Your broker should guide you on insurance strategies aligned with your risk profile and budget.
  2. Increase workforce engagement through benefits
    Hospitality companies with a benefits strategy based on personalization and fostering a quality employee experience (QEX) will boost engagement, have an advantage in recruiting and retention and lower risk as well.
  3. Transparency counts
    Let your broker know what changes you’ve made to the business, so there are no surprises at renewal. Exposures and insurance needs should be reviewed at least 90 days prior to policy renewal, so your broker can identify the best options.
  • T&S Brass Eversteel Pre-Rinse Units
  • Simplot Frozen Avocado
  • McKee Foodservice
  • AyrKing Mixstir
  • RAK Porcelain
  • BelGioioso Burrata
  • DAVO Sales Tax
  • Inline Plastics Safe-T-Chef
  • Day & Nite
  • RATIONAL USA
  • Imperial Dade
Robert Fiorito serves as Vice President with HUB International Northeast, a leading global insurance brokerage, where he specializes in providing insurance services to the restaurant industry. As a 25-year veteran and former restaurateur himself, Bob has worked with a wide array of restaurant and food service businesses, ranging from fast-food chains to upscale, “white tablecloth" dining establishments. Robert can be reached at 212-338-2324 or by email at robert.fiorito@hubinternational.com. For more information on HUB, please visit Hub International.

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