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Bill would serve health insurance to restaurant employees
By Dennis Quick
Senior Staff Writer
Charleston-based Hospitality Management Group Inc. offers its employees something hard to find in the Lowcountry’s restaurant industry—employee benefits.
HMGI, which owns East Bay Street restaurants Magnolias, Blossom Café and Cypress, offers its salaried employees full medical and dental coverage, according to Donald Barickman, HMGI executive chef.
The benefits, plus HMGI’s reputation, have helped the group attract and retain employees. That is a rare feat in an industry known for its high employee turnover rate.
“We consider our turnover to be less than average,” Barickman said. “Most of the high turnover is in the kitchen, with entry-level line cooks and support staff.”
Low wages and few if any benefits traditionally have summarized employment in the nation’s restaurant industry.
But that could change, at least as far as benefits are concerned, if the U.S. Senate passes the Small Business Fairness Act that the House passed in July.
The act would make affordable health insurance available to the nation’s 12.2 million restaurant employees, including the Charleston area’s approximately 26,400 food-preparation and service workers, through Association Health Plans.
AHPs would allow restaurants and other small businesses to unite under associations and purchase health insurance at group rates.
“We’re working with Congress to make health insurance more affordable,” said Tom Sponseller, president and chief executive of the Columbia-based Hospitality Association of South Carolina, which represents 1,800 restaurants and hotels.
When the nation’s hotels started receiving association group health insurance in January, they saved a minimum of 25% in health care costs during the first six months, Sponseller said.
By providing affordable health insurance, restaurants would find it easier to recruit and maintain employees in an industry known for its high employee turnover, Sponseller explained. Additionally, small, independent restaurants would be able to compete better with larger restaurants and franchises for top-notch personnel.
Dollars dictate
The benefits a restaurant offers depends on how profitable it is, said Robert Frash, a professor in the College of Charleston’s Hospitality and Tourism Management Department.
“It all comes down to whether or not you have the dollars,” he pointed out.
Restaurants that are part of corporate chains tend to have more dollars for purchasing employee benefits than independent restaurants, Frash noted. He added that a 1995 National Restaurant Association report put average restaurant profit margins at 1% to 3%, “and I don’t think that’s changed much.”
Employees of Charleston Place Hotel, part of the Orient-Express international hotel chain, enjoy health insurance benefits and a 401(k) retirement plan, said Paul Stracey, the hotel’s general manager.
“We have a very low turnover rate,” Stracey observed. He added that large hotels need an attractive benefits package to compete with other hotels for employees.
With slim profit margins and rising food distribution and operations costs, most independent restaurants cannot afford to provide their employees with health insurance, the cost of which continues to soar, Frash said.
Nevertheless, independents continue to attract workers largely because of a more family-like work environment, Frash noted.
“Independents are more personal with their employees and get to know them better,” Frash explained. “They offer their employees opportunities to do a variety of things.”
Although larger corporations tend to offer higher wages, more benefits and better chances for career advancement, employees generally are confined to the tasks for which they were trained, said Frash.
“Corporations take a ‘need-to-know’ approach with their employees,” Frash explained.
Sweetening the pot
Lowcountry restaurant cooks earn an average hourly wage of $7.48, compared with the national average of $9.63, according to the U.S. Bureau of Labor Statistics’ 2004 figures.
Barickman noted that local restaurant wages are rising, yet the wage increase is causing financial concern to restaurateurs.
“Unfortunately, every new property seems to raise the bar a notch just to get a staff to open with,” he said. “We are already reaching levels of national average hourly wages for line cooks and kitchen staff.”
Recruiting restaurant personnel during a strong economy is difficult because higher-paying jobs offering at least some benefits are more available, Sponseller remarked. To sweeten the recruitment pot, restaurants increasingly are looking at offering benefits like health insurance. Whether they can afford such benefits is another matter.
“The restaurant industry is dominated by small businesses, and this legislation is vitally important to restaurateurs nationwide and their employees, including members of the National Restaurant Association,” said Steven C. Anderson, the association’s president and chief executive.
Dennis Quick covers hospitality and tourism for the Business Journal. E-mail him at dquick@charlestonbusiness.com.
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