RESTAURANTS STRUGGLE TO MAKE HIGHER WAGES AFFORDABLE

With minimum wages rising and new overtime legislation, retailers are looking for ways to cope and still turn a profit.

August 3, 2016

​NEW YORK CITY – Higher minimum wages have been popping up all over the country, with more than two dozen states registering a higher minimum wage than the federal $7.25 an hour, QSR Magazine reports. Add to that the U.S. Department of Labor’s revised overtime pay rule, which goes into effect Dec. 1, and it’s no wonder retailers are scrambling to figure out how to pay more and still make money.

The restaurant industry will tackle the increased labor costs by raising menu prices, slashing employee hours, installing labor-saving technology or reducing benefits. “If you have to pay more in minimum wage, the only way to offset that is to pay less in benefits,” said Todd Wulffson, partner at Carothers DiSante & Freudenberger LLP. “It’s actually causing more harm to the people it was intended to help.”

“With overtime, it’s not necessarily that the cost of doing business is going to go up as much as you’re going to change the structure of the restaurant,” said Angelo Amador, senior vice president of labor and workforce policy at the National Restaurant Association.

Changes could involve reducing the number of managers, moving salaried workers back to part-time jobs, and assigning managers to more than one unit. “You have positions that were salaried—which were viewed as the first step into management—disappearing,” Amador said. “As much as the [Obama] administration may want to say that this is a protection or something they’re doing for the employees, most employees that are now salaried do not view it as a promotion when they’re made hourly employees.”

Not every restaurateur views the higher wages as bad for business. &Pizza offers health insurance, bridge loans and subsidized childcare, along with a $2 per hour higher starting wage. “In the short term, it might feel like there’s less money going into their wallet, but in the long term, they may be able to craft a strategy around how that’s going to be beneficial to the company and to the company’s people by thinking differently about how to operate a restaurant,” said &pizza cofounder, CEO, and president Michael Lastoria.