Wages are on the rise. And that’s no bad thing, especially given the sharp rises we’ve seen in day-to-day living costs in recent years. People have to be able to earn enough to get by. And beyond that, they should be able to earn enough to lead comfortable, happy lives.
The difficulty lies in how rising employment costs affect businesses, especially in sectors like hospitality where margins are typically tight and salaries tend to be at the lower end of the earnings spectrum. For restaurant owners, the government’s recent announcements that the national minimum wage and employer National Insurance Contributions (NIC) will both rise from April 2025 represents yet another cost increase, after several years of seeing produce and energy prices jump steeply.
Restaurateurs have already had to cope with regulatory pressures adding to their wage bills. In April 2024, the National Living Wage became mandatory for all workers aged 12 and over, effectively becoming the new de facto statutory minimum wage. A year earlier, 48.1% of all employees in hospitality earned less than the Living Wage. When it increases to £12.21 an hour in April – an increase of 6.7% – the minimum gross salary per employee will be £23,810. With 15% in employers’ NIC plus pension contributions on top of that.
For some restaurant businesses, such increases are all but impossible to absorb without wiping out their margins. The alternatives are barely more attractive. The average cost of a meal in a restaurant shot up by 15% in 2023 alone. Passing on higher staffing costs with further price increases is likely to hurt sales.
The other option is to cut staff. But this affects efficiency and quality of service. Long term, falls in customer satisfaction are also likely to lead to falls in custom.
Rise of the robots?
This might sound like an unusual point to bring up the ‘let robots do the work’ argument. There are understandable sensitivities around any notion of replacing workers with machines. People losing their jobs is an even worse state of affairs than pay not keeping up with inflation.
But in restaurants and similar sectors, robots might just be part of the answer to squaring the circle between higher wages and protecting business performance and profits. This line of reasoning rests on two key points. Let us explain.
Point one. Service robot technology has come a long way. The line of Keenon Dinerbot robots Oxhoo supplies can navigate safely and efficiently around a busy dining space delivering meals and collecting empties, without any need to install tracks or guides or any other kind of infrastructure. But that’s about the sum of what they can do.
Service robots do not present a way of replacing staff in a restaurant environment. People are still invaluable in doing everything from taking orders to providing a personal level of service (and, of course, preparing and cooking meals in the kitchen). But robots can take the burden of one specific manual task waiting staff otherwise have to carry out.
Point two. It’s better to have a small team of well-paid, happy, motivated staff who are always on top of their game providing the highest standards of service than it is to have a larger group of low-paid employees who, on paper, should be able to get all the meals out on time when your restaurant is at it’s busiest, but who are generally demotivated and disinterested.
To repeat the point we made at the top of this article, higher wages are a good thing for workers. But they can also be good for business. The rub lies in being able to afford them.
Compromises have to be made somewhere. For restaurant owners, with higher employment costs on the horizon, perhaps that compromise involves thinking around how they can maintain standards and deliver a great experience with a smaller staff base. Downsizing could even create room to push wages well above the statutory baseline, making it easier to attract and retain the very best employees. Great people are the first priority for gaining a competitive advantage, for creating an offer that diners love and talk about and want to come back to again and again. People are an essential ingredient for growth and success.
With fewer staff, gaps in capacity and capabilities will have to be filled. Some of these might be addressed via the traditional routes of operational planning and streamlining. But the potential of technology to play a role should not be underestimated. If robots can handle the table service capabilities of one or two staff members at a fraction of the cost, freeing up capacity to pay more senior staff who can focus their time on delivering a level of personal interaction that diners appreciate and remember, it’s a win-win for both your business and your customers.
If you’re interested in learning more about robots in your business, contact our experienced and friendly team to find out how we can help you.