JR Bruton
The group that owns five restaurants in New Mexico, including the 500-seat El Patron (above), says adhering to the ACA guidelines will cost the company upward of $300,000 per year.

How to Cure Restaurant Labor Pains

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By Daniel P. Smith November 2016

Nick Kapnison has been in the restaurant game for more than a half century, but the current labor environment, from minimum wage hikes and paid sick time to Affordable Care Act (aca) mandates, is something altogether new. And frustrating. 

“As difficult as it is to get good employees, these new guidelines are making the labor side of the business that much more difficult,” says Kapnison, who owns five full-service restaurants in Albuquerque, New Mexico, including the venerable Nick & Jimmy’s and El Patron, a 500-seat casual eatery.

Kapnison, in fact, estimates that adhering to ACA guidelines alone will cost him upward of $300,000 each year, a sizable sum in an industry that largely counts its profit in singles and fives, not twenties and fifties.

Enter ShiftPixy, a California-based startup aiming to minimize the sting of labor pains that restaurant operators like Kapnison face. Launched in July 2015 in response to the ACA, which requires “applicable large employers” to offer health benefits to full-time employees—defined as 30 hours of service per week or 130 hours of service in any given month—or face possible penalties, ShiftPixy will process the entire payroll, insurance, and regulatory demands for each shift-hour worked, thereby removing the arduous compliance burden from the restaurant owner’s shoulders.

“This is a way for restaurants to offload their part-time employees and make ShiftPixy the employer of record,” ShiftPixy co-founder Steve Holmes says.

Holmes, who has been working in the hospitality labor market for more than two decades, estimates that half of restaurant owners have done nothing with ACA compliance, which could result in fines of up to $3,000 per employee.

“We see massive noncompliance because operators don’t have the tools to address this complex legislation,” Holmes says. “So instead, owners just throw up their hands and hope it is repealed or that they don’t get fined.”

With ACA a still-present reality, however, those “applicable large employers” must get in line. Holmes says this is fueling an increasing strategic shift at many restaurants, where operators are capping the schedules of all staff beyond “core full-timers” to 29 hours of weekly work—in hopes of escaping the ACA hammer. Juggling all those part-timers, however, is an onerous task.

To address the dilemma, Holmes says operators can simply move part-time employees onto the ShiftPixy system, which will handle all of the administrative and regulatory matters that accompany the hiring of part-time staff. Restaurants, then, get the benefit of having a qualified workforce and maintaining the necessary staffing levels—sans the regulatory burdens that come with employing a plethora of “Shifters,” as ShiftPixy terms them.

“This solution hits at the heart of restaurant operators’ greatest liability and risk, which is the variable-hour, part-time employee,” Holmes says.

The solution holds particular appeal for operators like Kapnison who bemoan the administrative headaches that hefty new regulations like ACA unleash. “It will be a lot easier for us to run employees through [ShiftPixy] rather than adhering to all of the book work and regulations the government is requiring,” Kapnison says.

In addition to the administrative end, ShiftPixy also provides operators access to an on-demand labor pool. Directly on the ShiftPixy system, an operator can broadcast a shift opening and assess candidates, including reviewing any prospect’s résumé, which includes work history and employer reviews.

“This is a big difference from placing an ad, interviewing candidates, and then onboarding a new employee,” Holmes says, adding that ShiftPixy includes a quality control feature that ensures only relevant candidates are approved to work at a given establishment.Consider, he suggests, a restaurant with five unique drinks at its establishment. For a “Shifter” to be eligible to work at that specific restaurant, the individual would need to pass a restaurant-specific test and demonstrate his or her technical knowledge.

“Better yet, there’s no HR implication here,” Holmes says. “If the Shifter doesn’t do the job, then you just don’t bring them back.” Conversely, Holmes adds, operators also have the option to permanently hire a Shifter who displays the right tools and attitude. “In this way, you’re essentially automating recruiting and doing so at no cost,” he says. 

The ShiftPixy app debuted in early September in California and will be operating in New York City, Chicago, Dallas, and Orlando, Florida, by year’s end. In the early months of 2017, Holmes says ShiftPixy will add another 10 to 12 U.S. cities onto its platform. “With all the contingent liabilities and more uncertainty than ever in the labor market, ShiftPixy helps put a lid on labor costs by giving restaurant operators cost certainty,” Holmes says.

Indeed, it’s that potential that intrigues Kapnison: “Given the complexities in the labor environment, creative solutions are needed and that makes [ShiftPixy] worth a serious look.”