Rising Hourly Wages Are Reshaping Talent Acquisition Strategies for HR Leaders
Rising wages and changing worker expectations require businesses to focus on more than just pay for talent acquisition. Trust, career growth and predictable scheduling are key to retention, while declining tips and higher base wages demand updated compensation models and workforce technology.
In years past, a national restaurant chain opening a new location might expect to fill hourly staff positions within weeks. But today, applications trickle in slowly.
So what's the answer for fast-food chains, coffee shops and quick-service restaurants?
New talent acquisition strategies that override traditional tipped wages to take into account higher starting pay, sign-on bonuses and flexible schedules.
Thanks to a double-digit jump in wages for hourly workers between 2018 and 2019, and more increases since then, recruiting hourly workers today requires more than bumping up pay. HR teams must rethink what makes a job attractive, balancing factors like wages, benefits and career growth to bring in the right talent.
The most effective talent acquisition strategies now require a deeper understanding of wage trends, workforce expectations and compliance risks. Understanding these trends is key to workforce planning, reducing employee turnover and ensuring competitive pay structures that attract and retain the best talent.
The rise in hourly pay: What's driving the shift?
Post-pandemic shifts
The labor market has changed significantly since 2020. This is especially true in hospitality, which lost 8.2 million jobs between March and April of 2020, according to the U.S. Bureau of Labor Statistics. The early post-pandemic years saw employers raising wages to bring back workers, but supply and demand only scratch the surface of the new expectations hourly workers want on the table: fair pay, predictable schedules and career advancement.
"Worker expectations have changed dramatically since COVID-19," says Cyprian Yankey, principal consultant for future of work at ADP. "But power dynamics between employers and employees shape how those expectations show up in the job market."
What HR can do:
Conduct employee sentiment surveys to understand what workers value most.
Offer more predictable scheduling to improve job satisfaction and retention.
Develop internal career pathways that show workers how they can grow within the company.
Workers who feel their pay is unfair are 3.4x less likely to be engaged, leading to diminished trust.
Cyprian Yankey, principal consultant for future of work, ADP
Minimum wage increases
At the beginning of 2025, more than 20 states raised their minimum wage. These changes aren't happening in isolation — local governments are responding to cost-of-living pressures and labor advocacy efforts. Higher base pay means businesses must adjust pay structures to maintain equity between new hires and existing employees.
"By the end of 2025, 23 states and 65 cities and counties will raise their minimum wage floors," explains Yankey. "Coupled with inflation and labor shortages, that is driving wage growth in a real way."
Restaurant wages tell the story well. In Chicago, base pay for sit-down restaurant workers has more than doubled since 2020, reducing the role of tips. In cities with higher costs of living, businesses are raising wages well above the legal minimum to stay competitive.
What HR can do:
Audit pay structures as minimum wage laws change.
Benchmark wages against competitors to attract talent without overpaying.
Communicate pay strategy and career growth options to employees.
Lack of trust, advancement
Wages for leisure and hospitality workers jumped 38% between 2018 and 2019, giving hourly workers more options for where and how they work. Companies winning in this environment are doing more than simply matching top wages — they're rethinking how they build and reinforce trust within the organization.
"Employers often mistake compensation as the #1 reason for people leaving their company," says Yankey. "However, ADP's research shows that trust is a crucial factor in retention. Employees who trust their senior leadership are 41 times more likely to be highly motivated and committed, which breeds higher engagement."
ADP data also reveals the massive impact of trust on retention:
16X teammates: Workers who trust their teammates are 16 times more likely to be highly motivated and committed compared to those who don't.
26X managers: Workers who trust their managers and supervisors are 26 times more likely to be highly motivated and committed than those who don't.
41X senior leaders: Workers who trust their organization's senior leadership are 41 times more likely to be highly motivated and committed compared to those who don't.
What HR can do:
Encourage managers to support open communication, recognize employee contributions and follow through on commitments.
Create clear career pathways with internal promotions, mentorship programs and development opportunities, showing employees a future within the company.
Develop systems for sharing company goals, decision-making processes and progress to help employees feel valued and informed.
The changing face of restaurant compensation
The shrinking role of tips
Rising base wages leave gratuities making up a smaller percentage of total compensation. In cities like Boston and Chicago, for example, restaurant wages have surged 37%–50%, while tip income has grown slower. Some restaurants are moving to service charge models or no-tipping policies to create more predictable pay structures. As tips shrink and wages normalize across different employment opportunities, hourly workers naturally focus more on what else a job offers.
"It's crucial for readers to keep in mind that compensation is not just about wages, because that's not the only thing important to the people you're trying to pay," explains Yankey. "Mental wellness, flexible work arrangements, robust talent development programs and organizational culture reinforced at the team and enterprise level all need to be considered to attract the talent required to build agile organizations."
What HR can do:
Consider supporting mental wellness by offering employee assistance programs and stress management resources.
Work to implement flexible work arrangements that accommodate employees' needs, such as predictable scheduling and remote or hybrid options where possible.
Develop talent by offering continuous learning opportunities and career advancement programs.
Impact on traditional compensation models
As tipping culture shifts, restaurant employers must rethink their approach to wages. Higher base pay helps workers, but it also pressures restaurant owners to offset labor costs. According to the Indeed Hiring Lab, wage growth has leveled off at a strong but sustainable pace, indicating a slowdown from the rapid increases seen in prior years. Make sure you get support in regularly monitoring and adjusting payroll decisions to confidently compensate talent.
"Workers who feel their pay is unfair are 3.4x less likely to be engaged, leading to diminished trust," says Yankey. "Leverage high-quality data sets and intuitive technology that embeds pay equity and transparency into every compensation process."
What HR can do:
Use data-driven payroll systems to ensure fair and transparent compensation adjustments.
Implement pay equity reviews to regularly assess and correct wage disparities.
Train managers on compensation transparency to build trust and engagement with employees.
From wages to workplace growth
Today's hourly workforce requires HR leaders to redefine what makes a job worth staying for. As tipping declines and base pay normalizes, the competition for talent will shift beyond compensation. Employers who focus solely on pay will find themselves in an endless wage race, while those who build trust, offer growth and prioritize stability will create workplaces where employees choose to stay.
Learn more about this topic by downloading the Today at Work report from ADP Research.
