Can hospitality businesses retain employees without burning cash?

The hospitality industry is in turmoil, again.

After a few disastrous pandemic years, “UK hospitality bosses say the industry is fighting for survival” as the UK is going through an inflation storm.

On top of it all, can they afford to lose employees? What would it take for hospitality businesses to increase employee retention? We provide answers in this blog post.

Why improving employee retention in hospitality is suddenly so important in the UK?

Two reasons stand out:

• Quality of customer service
• Cost

Experienced employees are likely to provide a better customer service experience.

The hospitality industry, as you know, heavily relies on customer service. 

Having experienced and knowledgeable staff who understand the industry's nuances is essential for providing exceptional customer service. 

Employees who have been with the business for a longer period of time are more likely to have a deep understanding of the company's values, procedures, and customer expectations, resulting in consistently high-quality service.

The cost of employee turnover in hospitality can quickly get out of hands

Additionally, a high employee turnover rate can prove very costly for hospitality businesses (or any other business, for that matter).

Research (The Cost of Brain Drain) by Oxford Economics and Unum reveals that the average cost of turnover (per employee earning £25,000 a year or more) is £30,614. 

Now, this is a number that’s largely used and taken out of context on the internet.  

First, this is a study from 2014. And it was conducted across five sectors: Tech and IT, Media and Advertising, Accounting, Legal, and Retail. Roughly ten years later, we can assume that the cost of turnover has dramatically increased, especially with the current inflation storm we’re going through at the moment.

Moreover, when experienced employees leave, there is a loss of institutional knowledge and expertise. Constantly having to replace employees can lead to disruptions in operations, decreased productivity, and ultimately impact the profitability of the business.

To make a long story short, employee turnover can be costly as it involves ongoing recruitment processes and employee training.

8 reasons why it’s challenging for UK hospitality businesses to retain their employees

Low wages and limited career growth opportunities

Hospitality jobs often have lower wages compared to other industries. Many employees in this sector may be motivated to seek higher-paying jobs or opportunities outside the industry to improve their financial situation. The low wages can also make it challenging for businesses to attract and retain high performers and experienced employees.

Entry-level positions may also be a source of frustration and demotivation among ambitious employees who seek to advance their careers. Without clear career paths for growth and advancement, employees may feel stagnant in their roles and seek opportunities elsewhere.

Fast-moving jobs

Another key factor is the transient nature of the industry.

Hospitality positions are often seen as entry-level or part-time jobs. They attract a lot of individuals looking for temporary employment or to gain initial experience. These employees may not have a long-term interest or commitment to the industry or a particular business, leading to a higher turnover rate.

Demanding hours and stressful working conditions

What’s more, the hospitality industry is known for its long and demanding hours.

Employees in this sector often have irregular work hours, including evenings, weekends, and holidays. The strenuous nature of the work, combined with the lack of work-life balance, can result in burnout and dissatisfaction among employees. This, in turn, increases the likelihood of turnover as employees seek positions with better work-life balance and job satisfaction.

Hospitality jobs can also be physically demanding and mentally stressful. In fact, hospitality is reportedly the most stressful industry in the UK, with 57% of employees saying they feel stressed at work.

One explanation is that hospitality workers aren’t always equipped to deal with demanding customers and manage high-pressure situations while maintaining a high level of service.

The stress and pressure experienced in this industry can contribute to burnout and a higher turnover rate as employees look for less demanding or stressful work environments.

Lack of job security

Hospitality businesses often experience fluctuations in demand due to seasonality, economic conditions, and unforeseen events. This can result in lay-offs or reduced working hours for employees, leading to job insecurity. Employees who feel uncertain about their job stability may be more inclined to search for more secure employment opportunities.

Skills gap and training challenges

Due to the fast-paced nature of the hospitality industry, training new employees can be challenging. The turnover rate in the sector can lead to a perpetual cycle of hiring and training new staff, which can be time-consuming and costly for businesses. This constant turnover can also result in a lack of experienced and skilled employees, impacting the overall quality of service offered.

High competition

Finally, and this is likely worsened by all the challenges mentioned above, the hospitality industry faces high competition for talent. 

With a wide range of businesses operating in this sector, employees have more options and opportunities to switch jobs. This competitive environment puts pressure on companies to offer competitive wages and benefits packages to attract and retain employees, which can be challenging for smaller businesses with limited budgets.

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So, what can be done, then?

What can UK hospitality companies actually do to increase employee retention?

To increase employee retention in the UK hospitality sector, companies can adopt various strategies.

Offer competitive compensation and benefits packages

Given the nature of the market, the main factor that will impact employee retention in the hospitality sector is pay via competitive compensation and benefits packages.

Note that, in addition to monetary benefits, perks such as discounted meals, flexible work arrangements, and opportunities for personal and professional development can also contribute to employee satisfaction and loyalty.

Great, but how can one offer competitive pay without breaking the bank?

One way to do this is to go through salary surveys to ensure that wages are fair and competitive within the industry. However, salary surveys are outdated the moment they’re out, especially when facing high inflation.

The best way to know what competitive pay actually is in your market and location is through Pay Tracker Live, a salary benchmarking tool that gives you access to the UK's most comprehensive real-time salary data at the click of a button.

Learn more about Pay Tracker Live.

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Support employees’ work-life balance

Implementing flexible scheduling options and promoting work-life balance can significantly improve the overall employee experience and satisfaction. Offering benefits such as paid time off, health insurance, and retirement plans can also make a company more attractive to employees and encourage them to stay for the long term.

Create a positive work environment

Businesses should focus on creating a positive work environment. This can be achieved by fostering a company culture of respect and open communication, recognising and rewarding employees' hard work and dedication, and providing opportunities for career growth and development.

By investing in employee training and development, businesses not only enhance employee skills but also show a commitment to their growth and advancement.

Fostering a sense of community and belonging within the company can greatly contribute to employee retention. Hosting team-building activities and implementing mentorship programs can create a supportive work environment where employees feel connected to their colleagues and the organisation.

Give employees a chance to grow

Providing opportunities for employee involvement and empowerment can contribute to higher retention rates.

Engaged workers tend to be happier and stick around longer. So, encouraging employees to take part in decision-making processes will help improve employee retention and motivation. This can be achieved through regular team meetings, employee feedback surveys, and formal recognition programs.

Keep employees happy. Keep performance at the top.

Step 1. Listen to what employees need.

Step 2. Keep employees happy (and around)

Step 3. Grow.

In conclusion, employee retention is critical for the success of hospitality businesses in the UK. By focusing on creating a positive work environment, offering competitive compensation and benefits, promoting work-life balance, and providing opportunities for growth and involvement, companies can increase employee retention rates and ultimately improve the overall performance and success of their business.

Of course, we at HR DataHub cannot help you deal with all of your challenges, but we sure can help you figure out what the right pay is to make your business a more attractive workplace.

If that sounds like something you’d like to explore, let’s talk!