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How Flexible Payout Can Improve Employee Retention

Part of the solution to the labor shortage is understanding how hospitality employees live and work. Then, offer solutions that reflect those workstyles.
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Is there such a thing as too much business? For the hospitality industry, the answer is yes—at least as currently constructed. With staffing down 3.6% below pre-pandemic levels, four out of five hospitality employers reported struggling to meet increasing consumer demand according to the National Restaurant Association.

At the height of the pandemic, hospitality faced many challenges, but most pressing, for hotels in particular, were a precipitous drop in guests and a labor shortage. Travel has returned, up 12% over 2022 according to TSA, but employees have not. Restaurants and bars are also struggle with staffing shortages, while having to reorganize their operations and adding services new to their business (e.g. delivery). Though the industry has been forced to do more with less, it came at the cost of employee and consumer satisfaction.

Let’s take a look at how the hospitality industry can address labor shortages, improve employee satisfaction, and, in the process, enhance the customer experience.

Legacy of the no-contact experience

During Covid, the hospitality industry adapted to the new normal, using digital tools to streamline processes and enable a no-contact experience. Mobile check-ins minimized interaction with hospitality staff, as did digital keys, which obviated the need for face-to-face contact — a major concern at the time. Cleaning rooms on request also limited guest interactions. Additionally, all of these tools and new procedures alleviated pressure on hospitality and cleaning staff.


While these adaptations were necessary and effective during Covid’s peak, the no-contact approach isn’t consistent with the current hospitality environment. The industry has experienced a marked increase in leisure and business travel over the last 6-12 months, and those incoming guests want personal interactions s and full access to amenities and services as part of their experience. The question is, how does the hospitality industry address this returning demand in the face of a persisting labor shortage?

Escaping the downward cycle of retention

Though staffing has rebounded since the peak of the pandemic, the industry is still almost a quarter of a million jobs short of February 2020 levels, according to the Bureau of Labor Statistics. Many who left hospitality sought work in industries with perceived stability, and that weren’t dependent on in-person interactions. Hospitality is now left with the dual challenge of attracting talent and retaining their current workforce.

Keeping staff happy is critical to retention, of course, but it’s a tall order in the face of the labor shortage. A reduced staff forced to meet a growing demand can lead to worker burnout, which can damage morale and erode employee satisfaction — all of which serves to undermine employee retention and compromise the customer experience.

It’s difficult to extricate yourself from this cycle. If your workforce is overworked, retention becomes elusive. If you lose staff, you may struggle to replace them in a timely manner, which could compel you to plug gaps in service by approving overtime or engaging contractors. This may address short-term needs but would likely prove costly and untenable in the long-run, especially if it hinders your ability to hire more staff or increase wages for your existing workforce.

Wage increase isn’t the only solution

Increasing wages and benefits is a staple to attracting talent and maintain employee retention, but the marketplace is more competitive, especially now that hospitality increasingly must compete with other industries for labor. Some organizations, still recovering from the economic freeze prompted by the pandemic, may not be in a position to raise wages and benefits enough to make an appreciable impact on hiring and retention. 

So, what is the hospitality industry to do? Providing staff with more flexible compensation options is one viable solution. Payroll cards, for example, can cut red tape and eliminate fees. It’s also more accessible, as a bank account is not required. Using this solution, an employer can exercise some discretion to allow employees to access pay up to two weeks in advance. This flexibility gives staff more control over their payouts, promotes financial well-being, and reduces financial anxiety.

Making tip payout (and tipping) easy

Tip payout can be tricky, especially at restaurants and bars that do brisk business. Managers have to enter systems manually in order to determine payout and disburse funds. Restaurants and bars must maintain enough cash on hand every day in order to promptly pay out tips. Often, delays occur, things get lost in the shuffle, or discrepancies arise. Keeping a lot of cash on hand also increases the likelihood of theft.

A tips calculation solution automates this process. Managers need only approve a payout summary, which will then push through a digital payout. A digital solution like this promotes transparency, reduces the risk of theft, expedites payout, and simplifies process management. Studies have even shown that customers on average tip 15% more if they can tip digitally.


Understanding your employees

Part of the solution to the labor shortage is understanding how hospitality employees live and work. Then, offer solutions that reflect those workstyles, like flexible payout solutions. Expedited digital payouts, digital tipping and earned payments provide staff more control over their finances, which can foster a positive work culture. Naturally, an improved, customer experience should follow.

Take care of your employees. Increase their wages if you can. If that’s not feasible with your budget, make their lives easier in other ways. It’ll enhance their work experience, which, in turn, will improve the quality of their service — an upward cycle that will pay dividends for employers and employees alike.


About the Author

Brian Radin is President of Comdata Prepaid, a FLEETCOR company that provides payment and operating technology that drives actionable insights from spending data, builds enhanced controls and positively impacts its clients’ bottom lines. The company supports more than 30,000 businesses to better manage $55B in annual fleet, corporate purchasing and payroll spending.

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