How restaurants are responding to another tight labor market

On By Pranco

Recent numbers suggest that restaurant hiring trends have normalized somewhat at this stage of the post-2020 trajectory. According to the Bureau of Labor Statistics, the restaurant and bar sector added 3,700 jobs in October, for an unemployment rate of 3.7 percent. Although there was a huge downturn from September, when 39,000 jobs were added (a figure significantly reduced from preliminary reports of 70,000), this does reflect seasonal trends that were more in line with plans than previous years when consumers did not follow traditional patterns. Essentially, restaurants are establishing, staffing and preparing for a holiday rush, with more hiring potentially on the horizon.

At a higher level, the sector is still nearly 118,000 above pre-COVID peaks of 12.3 million jobs in February 2020. Full service remains down about 4 percent (234,000 jobs), while quick service is down 3 percent (156,000) was higher than before. Considering the cafeteria/grill/buffet segment alone is down 33 percent from 2020, this suggests some of this is due to closures on the one hand (full service) and growth on the other (quick service) .

But as we have discussed in the pastA higher number of vacancies does not necessarily mean ‘business as usual’. Today’s “Great Resignation” and reality restaurants often recruit from a labor pool that has entered working age during COVID or in the aftermath, which has led to different expectations. 7shifts surveyed 973 restaurant managers about compensation, technology use, retention tactics and more to get a fresh sense of how the job market is shaping up as the calendar turns to 2025.

The backdrop is that the labor pool, as always in this sector, feels tight as industries continue to compete for talent amid rising wages. So many workers who once preferred restaurants are now finding other options at the entry point. 7shifts says that despite the growth of the economy, restaurants are still struggling to attract workers who see this opportunity as a viable long-term option. The unrest during the election year didn’t help either. When asked to describe the current state of the restaurant labor market in their region, 65 percent of respondents said it was “tight” or “very tight.” Only 28 percent called it “balanced” and 7 percent “easy.”

You can see this in the dichotomy of job growth: it is mainly driven by segments that generally employ fewer people (quick services).

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In the survey, 30 percent cited recruitment as their biggest challenge, while 27 percent pointed to retention. Nearly 40 percent (39) said the quality of applicants was better than previous years; 38 percent said not much has changed year over year.

What strategies have you deployed this year to improve retention?

  • Flexible planning: 70 percent
  • Increased wages: 53 percent
  • Employee recognition programs: 36 percent
  • Career development opportunities: 26 percent
  • Enhanced benefits: 21 percent
  • Changes in the tip distribution: 17 percent
  • None: 8 percent
  • Other: 1 percent

As per the survey from Danielle Hester, director of team member experience at fast casual gusto!: “We revamped our hiring process by training managers and creating guides to help them apply and hire better. We are not a typical organization; we prioritize our values ​​and bring the core principles back to the store level. We started measuring employee development and performance based on these values. Since we started aligning our operations with our company values, I have noticed a positive impact on employee turnover.” Read more about the brand’s culture-driven growth with 14 units here.

White space remains to meet changing requirements. According to the data, 69 percent of respondents say their restaurants do not offer services such as child care or mental health care.

As for pay, there’s little doubt they earn more. The average annual base wage is $14.20 per hour, up from $13.64, or 4 percent. The average total compensation increased from $17.45 to $18.16 per hour.

What is the average wage increase (if any) you implemented for hourly employees in 2024?

  • No increase: 20 percent
  • 1 to 2 percent: 41 percent
  • 3–5 percent: 32 percent
  • 6 percent or more: 7 percent

Hester added enthusiasm! has changed its pay scale to provide better benefits and now offers a 401(k) plan and better health insurance in an effort to retain employees.

Naturally, the wage discussion differs per region.

Seattle-Tacoma-Bellevue, Washington, rose 3.5 percent to $25.35 in average hourly earnings, according to Square’s Payroll Index. San Francisco-Oakland-Berkely, California, rose 1.98 percent to $25.34. Portland-Vancouver, Hillsboro, Ore./Washington, rose 3.49 percent to $23.02. San Jose-Sunnyvale-Santa Clara, California rose 2 percent to $22.30. San Diego-Chula Vista-Carlsbad, California, rose 3.75 percent to $22.15.

Those were the best subways. Here’s the other end of the spectrum.

  • Charlotte-Concord-Gastonia, Carolinas: Up 5.22 percent to $15
  • Houston-The Woodlands-Sugar Land, Texas: Up 2.8 percent to $15
  • Cincinnati, Ohio-Kentucky-Indiana: Up 7.37 percent to $15.27
  • Dallas-Fort Worth-Arlington, Texas: Up 1.49 percent to $15.28
  • San Antonio-New Braunfels, Texas: Up 1.74 percent to $15.50

“The bottom line is that restaurant workers will take home more than they would in 2023,” 7shifts said. “This also makes it more challenging for operators who are facing rising costs everywhere, eroding already thin profit margins. Seventy-three percent of respondents say higher wages have impacted their bottom line in the past year.”

The company’s research also found that tipping practices haven’t changed that much recently. Sixty-three percent of restaurants reported no adjustment to their tipping models. This could reflect the industry’s reluctance to move away from tipping, 7shifts noted, as it still serves as an essential source of income for many workers, especially in regions where base wages are lower (and the tip credit still plays a role).

However, some operators did report experimenting with alternative compensation models, including service charges or higher menu prices to compensate for the elimination of tips (often in areas where tip credits disappeared). Although these models are gaining some attention, they have not yet achieved widespread acceptance.

What’s also worth bringing into the conversation is how quick-service tipping has further blurred price levels across segments. That is also an evolution that is happening, but one that is aging the proposition in categories such as fast casual and casual dining. It has helped full-service brands strengthen their value as express delivery providers try to balance their barbells and offer options to value seekers and higher-income diners willing to spend more.

“It’s a fluid issue that raises opinions among diners and servers alike. Change may be on the horizon as the new Trump administration has pledged to end tax on tips for service workers,” 7shifts said of tipping in general. “State governments have also joined the ban on junk fees, leaving some restaurants unsure whether service charges will be allowed to continue.”

Although unclear, what is clear is that workers today are more aware of how money reaches them and what is available from job to job.

Here’s a look at some 2025 hiring trends from experts in the report:

Closer to home

Jana Domanico, HR operations at BOKA Restaurant Group:

“In hiring hourly employees this year, I’ve noticed more and more employees are trying to eliminate their commute and work closer to home. Employees used to seek out the busiest restaurants in the trendiest neighborhoods, but that may be shifting slightly. Employees prioritize their time and try to save money on parking/transit. It seems positive that local residents from a higher service background are working in their community with knowledge and love for the area.”

A big reset

Alice Cheng, Founder and CEO of Culinary Agents. Read more about Alice’s story in this article.

“Overall, this year has been the year of reset, planning and growth for many companies. For the most part, we saw (and continue to see) companies becoming more efficient with the tools they use and streamlining their operations. Companies that use the tools they have fully invested in are the most successful.”

Pulse check

Hester of enthusiasm!:

“If we see people leaving at around six months, we would implement 120-day surveys to get a sense of how they are feeling and take a more data-driven approach to retention.”

The 7shifts survey also asked operators how they use technology to overcome challenges.

What technology restaurants adopted in 2024 to help with team management

  • Planning software: 27 percent
  • Payroll/HR software: 33 percent
  • Tip management software: 12 percent
  • Task management software: 16 percent
  • Performance management tools: 21 percent
  • Training platforms: 29 percent
  • None: 32 percent
  • Other: 1 percent

In short, 65 percent of restaurants report using some form of technology to improve efficiency and address the labor challenge. A quarter said they use HR software to track employee performance and almost half (48 percent) said they use cloud-based software for shift scheduling. When it comes to team communications, 48 ​​percent of operators say they use messaging apps for critical updates; 22 percent use special planning or HR software.

There is plenty of room to evolve. 27 percent of respondents say they still plan on paper or whiteboards and 23 percent rely on Excel or Google Sheets. Sixty-four percent added that they track tasks manually via paper or a spreadsheet, making it harder to hold teams accountable. “Those who invest in these technologies will improve their operational efficiency and their ability to retain top talent in an increasingly competitive marketplace,” 7shifts said.