As your labor costs increase, know that Chefsheet was designed to help you reduce your cost of goods and increase your bottom line. With Chefsheet, you can see which of your menu items are the most and least profitable and how much you should be charging for them. Track your vendor prices and keep your vendors accountable for what they are charging you. Take comprehensive, clean, monthly or weekly inventories to know your true costs as they are happening. For help with any of this or any other Chefsheet features, contact support to schedule a demo or training.
With the start of 2016 many states and some cities will see an increase in minimum wage. Almost everyone who has a job in the United States must be paid at least the federal minimum wage of $7.25 per hour. Without discussing tip credits, the only people who can legally make less than the minimum wage are business owners, those who are self-employed, those covered by a union contract and/or people who are interning and receiving college credit for the work they are performing. If you own your own restaurant or bar, you are free to make less than the minimum wage.
Twenty-nine states have passed laws increasing the minimum wage above the federal minimum wage. A county or city may set up its own minimum wage provided it is equal to or greater than the state minimum wage. The federal minimum wage was last increased in 2009. Many state and local minimum wage laws have automatic annual increases. These increases may be scheduled in advance or may be indexed to inflation. Inflation indexes are generally set to the Consumer Price Index or CPI. The CPI tracks the prices of items such as food, energy and clothing in a geographical area. Indexed minimum wages will generally increase annually by the same amount as the CPI for the area increased in the previous year. Most indexed minimum wages can only go up or remain flat. This means that during an extreme recession or depression, when price growth is negative, the minimum wage can not go down.
A tip credit is a means of calculating a tipped employees tip income as part of the income needed to meet the minimum hourly wage. Federal law says that tipped employees must also be paid $2.13 per hour. Many states have two minimums, one for tipped employees and another for non-tipped employees. Seven states do not allow tips to be considered in minimum wage. In a state with no tip credit, a waiter making $40 per hour in tips will still be paid the state minimum wage, whatever it may be. For the purpose of taxing income all states and the federal government combine tips and hourly pay. Both the employees and the employers pay payroll taxes based on the combined earnings. All benefits such was workers compensation, disability and unemployment are also based on the total amount of tips and hourly income.
Since 1938 there have been different times when the minimum wage has been increased both federally and at the state level. Over the past couple of years there has been a great deal of energy around increasing the minimum wage with Seattle, San Francisco, Los Angeles, New York and many smaller cities all raising their minimum wage. San Francisco first divorced its minimum wage from the California minimum wage with an increase in 2004. The increases over the past few years largely began in Seattle.
In New York, Seattle, San Francisco, Los Angeles and many other cities and states, the primary group midwifing these minimum wage increase is The Service Employees International Union or SEIU. SEUI represents just below two million workers in fields ranging from health care to restaurants and hotels. SEIU, with partnership from other unions and community groups, funded the campaigns to raise the minimum wage in pretty much every city and state that has seen a recent increase. SEIU is a funder of the ‘Fight for Fifteen’ group and spent about $10 Million to organize employee walkouts at New York City fast food restaurants.
Members of SEIU are very unlikely to be affected by the minimum wage increases regardless of which industry they work in. Unionized restaurant workers are mostly found in hotels, convention centers and large venues. Most union restaurant workers already make more than the new minimum wages. Further, many union contracts are exempt from elements of US labor laws which means that a union worker could be paid less than the minimum wage in some cases.
Why are SEIU and other labor unions so interested in increasing the minimum wage? First, a rising sea lifts all boats. If non-union workers are paid more it follows that unions will be able to negotiate better contracts for their members. Also, for a long time, unionized restaurants have been at a disadvantage to independent, non-union restaurants. A unionized hotel bar needs to charge more than the independent bar on the corner as the hotel bar has much higher labor and benefit costs. Most understand that airports, stadiums and hotels charge a lot more for the same product then one would pay at a 'regular' restaurant. For SEIU’s part, they state that their members believe in bettering the working conditions of others, regardless of if they are in a union.
A few things to know and consider:
Any wage increase is only to be paid from the date it went into effect. If your payroll does not start on the 1st of January, make sure you are calculating your minimum wage employees pay based on the effective rate before an increase multiplied the hours before the increase plus the effective rate after the increase multiplied the hours worked after the increase. Minimum wage employees may have two pay rates on a single check for the pay period that covers the New Year.
Is there another way? The tips paid to waiters may represent an amount of about 18% of your restaurants sales. Currently all of this money is going to just the tipped employees. Some restaurants in high minimum wage markets have already begun switching to a ‘service charge model’ where the guests are asked to or are required to pay a service charge so the cooks and servers are all paid higher wages. The challenges with a service charge model may be attracting front of house talent and committing to a higher rate all for your employees all the time.
Automation and outsourcing – The restaurant business is a pretty analogue business, but there may be ways to accomplish daily tasks more efficiently. There are answering services, services that can take reservations and orders online, bookkeeping services that process your books off shore and more. Every restaurant is different but there are ways to downsize labor if necessary.
What to expect in the future – Local and state increases in minimum wage in cities such as San Francisco, Seattle, Los Angeles, New York and other places where these increases have passed are popular with the voters and the public. Many large cities have become very expensive places in which to live. Politicians and voters see people struggling with higher rents, higher home prices and generally higher costs of living and wish to do something, perhaps anything, to help. Options such as increasing the minimum wage are popular as they cost the government very little, do not require tax increases or money to be transferred from other government programs, etc. Following a successful minimum wage increase in San Francisco, SEIU supported other initiatives such as paid sick leave, fixed scheduling to avoid last minute changes to a workers schedule, employer sponsored health care and other legal mandates that offer new benefits to employees.
While higher minimum wage may help many Americans, it will affect the efficiency and bottom line of restaurants everywhere. Are you ready?
See how Chefsheet can help you organize, plan and save in 2016!
No comments:
Post a Comment