Will Starbucks’ New Worker Incentives Elevate Performance?

Starbucks is offering workers up to $1,200 in annual performance bonuses — as well as expanded tipping options — as it seeks to boost worker pay, further drive progress in its Back to Starbucks transformation, and possibly fend off unionization efforts.

In a statement, Starbucks said the updated incentive rewards program reflects its commitment to offering “one of the most competitive total compensation and benefits packages in the industry,” and recognizes the contribution of workers in driving recently improved results.

Starbucks said, “The company expects this program to further strengthen alignment between incentives and the metrics that drive improvements to coffeehouse performance and operations, and the customer experience, which should offset costs related to the incentive rewards program.”

Starting this July, all U.S. hourly workers, including baristas and shift supervisors, can make up to an additional $300 each quarter — totaling $1,200 a year — when their stores meet or exceed sales, operational, and customer service goals. Starbucks said the incentives focus on “metrics that drive growth.”

Employees also earn new pathways for customers to leave tips. Currently, tipping is restricted to customers placing orders in-store and at the drive-thru, and who pay with cash, credit cards, or mobile transactions via Starbucks cards. Under the new policy, tipping prompts will extend to customers paying with any credit card for mobile orders, and when scanning and paying at the register.

With the new enhancements, eligible U.S. employees are estimated to earn potentially 5% to 8% more than what they currently earn.

The Seattle-based coffee chain said its hourly employees — including part-timers averaging 20 or more hours per week — earn more than $30 an hour on average in pay and benefits, including healthcare, stock awards, a paid college degree, and flexible leave.

Starbucks Investing in Labor Hours To Improve Performance

Since launching its Back to Starbucks transformation, Starbucks has invested more than $500 million in additional labor hours, including more staff during busy shifts. Starbucks cited several signs of progress from those investments:

• Associate sentiment continuing to improve, with a growing majority recommending Starbucks as a great place to work.
• Record high associate retention, with turnover nearly half the industry average. 
• Nearly 85% of associates receiving the schedules and hours they prefer. 

The payback is also reflected in performance: Starbucks’ first quarter results ended Dec. 28 marked the first time North America same-store sales grew in two years.

The new incentive plans are subject to collective bargaining at the approximately 5% of U.S. locations that are unionized. Starbucks has yet to agree to a contract with the union.

Union organizers, which have been pushing for higher wages, more consistent work schedules and better staffing, in a statement to Fortune criticized the new incentive program for being subject to Starbucks’ discretion.

“It’s notable that these bonuses and tips will be largely out of baristas’ control, relying on customer tipping and store performance metrics as determined by Starbucks management,” the union said.

More prompting for tips might also draw backlash from consumers increasingly annoyed by “tip creep,” where tipping is prompted at places that traditionally don’t require tips. Amore Philip, a public relations strategist based in New York, told Fox News that Starbucks’ customers “should absolutely expect to see more frequent tipping prompts.”