How better frontline and hourly jobs reduce turnover

As the Great Resignation swept across the workforce, a Great Realization has occurred among employers, one that’s made clear to some the importance of providing good pay and benefits to all workers, not just those in corporate offices.

“You’ve got to make sure your employees have good experiences in order to translate to great guest experiences,” Tawanda Starms, VP of RSC people experience and chief DE&I officer at Chipotle, told HR Brew.

Her company is one of over 100 organizations, including Lafayette Square, Amalgamated Bank, &pizza, Bloomberg Beta, and a host of universities, to have signed a new initiative as part of the Good Jobs Champions Group, in partnership with the Families and Workers Fund and the Aspen Institute, outlining a definition for “job quality.”

The definition, endorsed by the faculty of MIT’s Institute for Work and Employment Research, highlights three key components: economic stability, economic mobility, and “equity, respect, and voice.”

“What’s really important for any organization, whether…financial or morally [motivated], is that people should be paid equitably for the work that they do for any organization,” Starms said. For those that do not strive for equity in pay and promotion, Starms said, there’s a great risk, “not just for the company, but for the economy as a whole.”

The standards for pay and benefits are greater than ever before, even if the idea is not new. Companies like Costco and Chick-fil-A have long been known for investing in frontline employees as part of a strategy to boost the bottom line.

As more companies are starting to invest in job quality, especially for hourly workers, who typically earn near-minimum wages in jobs with little upward mobility, they’re finding that it’s helping to improve retention and fill key roles.

Setting the new standard. Last year, CVS raised its minimum wage to $15 an hour, Chipotle raised its hourly wage to $15 on average, and earlier this year, Target went a step further, announcing it would increase its minimum wage to between $15 and $24.

When it comes to the minimum wage, the market is saying “$20 is the new $15,” according to Indeed, which found searches for jobs that pay $20-per-hour increased 35% in the last year, eclipsing those for jobs that pay $15-per-hour in April 2021. Regulators are also starting to push employers in this direction, with many states raising the minimum wage.

On the benefits front, the Associated Press reported that, since 2021, “Walmart, Amazon, Target, Macy’s, Citi, and Lowe’s have made free college available to more than 3 million US workers.” Disney, Starbucks, McDonald’s, Taco Bell, and Chipotle are among the other major US employers offering education as a benefit to support employees’ ability to move up in the world.

“I think it’s due to market conditions. But I also think that there’s more awareness about the competitive advantage,” Alison Omens, chief strategy officer at JUST Capital, told HR Brew. A recent report from McKinsey found that 45% of frontline workers plan to leave their job in the next three to six months. By improving pay and benefits, companies are seeing “real value creation,” from improved resiliency and reducing turnover and absenteeism, Omens said.

HR, activate! When it comes to improving pay and benefits for frontline workers, buy-in from senior leadership is as critical as it can be difficult to achieve. At Chipotle, CFO Jack Hartung appears to both be on board.

“We’re not afraid to invest in our people,” Hartung told Yahoo Finance after the company raised its minimum wage and expanded education benefits. “We know that when we’ve invested in our people, we get return for many years to come.”

For HR teams struggling to gain support, it’s all about building the business case. Omens said that the first step is data collection and measurement.

What is the average pay for this group of workers? How often do they get raises and promotions? Do frontline employees matriculate into full-time management roles in restaurants or the corporate office? CHROs can also use their newly heightened status to influence their peers.

“The CHRO is really elevated,”' Omens explained. “These are board-level conversations now, and people just understand the connection to business performance and workforce strategies in a way that was much less true three years ago.”

Starms also emphasized that it’s HR leaders’ responsibility to bring relevant data—on retention and turnover, or employee sentiment—to this conversation. This can come from employee engagement and exit surveys, focus groups, informal chats, and more.

“It is costing organizations more to recruit talent,” Starms pointed out, adding that in addition to inflation, “retraining someone to learn how to cook our food…is also a contributing factor in terms of cost of recruiting…as people continue to leave, inflation continues to rise, those costs will only continue to rise.”

Improving pay and benefits for this segment can also serve a company’s DE&I goals. Workers in frontline industries in the US are disproportionately Black, Hispanic, and female, compared to the general worker population.

Ultimately, buy-in will depend on HR leaders’ ability to tie improved pay and benefits to the company’s financial success. But that shouldn’t be as difficult as it might’ve been a few years ago, said Starms, given CEOs’ and board leaders’ increasing awareness of the importance of good HR strategy.

“When you look at the biggest cost on any P&L, it is people,” Starms said. “To me, it’s just like any other investment you would make. You would make sure that you provided it with enough care and feeding, if you will, to thrive.”—AK

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