Is Surge Pricing a Short-term Fix That Prolongs Staffing Challenges?

The hospitality industry often faces staffing challenges, especially when it comes to filling last-minute shifts.

Many companies resort to surge pricing—increasing wages for short-notice shifts—to attract labor quickly. This tactic may provide a temporary solution, but it's not sustainable in the long run and may even exacerbate staffing problems.

While surge pricing has its place and can provide temporary relief for businesses struggling to fill last-minute shifts, there are trade-offs to consider when employing surge pricing. There are also a different set of tools we can use to solve the challenge of timely talent acquisition long term.

Let's start by looking at the trade-offs.

1. Distorted Wage Perception

Surge pricing can create a false sense of wages among internal employees. For example, imagine a restaurant that raises its pay rate from $15 to $20 per hour to fill a shift. An employee who usually works for $15 may feel undervalued, leading them to seek better-paying opportunities elsewhere.

This disparity could result in higher turnover rates, and the company may face further staffing challenges.

2. Unsustainable Employment Model

Continually raising wages through surge pricing is not a sustainable model for businesses. Picture a retail store that consistently raises its wages to attract workers for last-minute shifts. Eventually, this store will exceed its budget, leading to financial difficulties.

Businesses need a more predictable and budget-friendly approach to meeting their staffing needs.

So, what can we do about it?

The more direct and accessible way for most businesses to solve acquisition problems is by focusing on reliable and returning workers.

What does this mean?

Rather than resorting to surge pricing, businesses should prioritize building a team of vetted, reliable, and returning workers. For instance, a hotel can create a pool of dependable housekeeping staff who are familiar with the hotel's procedures and standards. In doing so, they can ensure that all their shifts are staffed by experienced individuals who already know the business, and who are committed to the hotel's success.

When the next shift comes around, fill rates will increase with the higher familiarity among your

One of the first steps to building team is focusing on prioritizing vetted and experienced workers.

The staffing industry is saturated with gig-based platforms that utilize surge pricing to attract hourly workers. Consider a catering company that hires temporary workers through a gig platform for an important series of events. They may end up with staff who lack the necessary skills or experience, leading to a disappointing experience for the event attendees and churn of the temporary staff involved.

If businesses want to solve talent acquisition challenges in the long term, need to focus on building relationships with temporary staff who are skilled, experienced, and aligned with their goals.

In Summary

Surge pricing may seem like an attractive short-term fix for staffing challenges, but it ultimately prolongs the problem. To solve long-term staffing challenges, businesses should:

• Be aware of the potential distortions in wage perception and its impact on employee turnover
• Recognize the unsustainable nature of relying on surge pricing for staffing
• Prioritize building a team of reliable and returning workers
• Focus on attracting vetted and experienced workers who align with the company's goals

Instead of reactive hiring based on urgency, businesses should invest in building a reliable team that meets their needs over the long term within budget constraints.

If you’d like to learn more on how to attract, retain, and engage workers, have a look at our free, on-demand webinars on contingent labor and what workers really want.

Here at Upshift, our partners build teams of workers who know their business, seeing a return rate of 92% for the best workers, within the first 30 days.

By offering flexible schedules and focusing on engaging the temporary workers, businesses can create long-term solutions that benefit both staff and bottom line long term!