Managing your restaurant has its share of challenges in day-to-day operations. Now add in a substantial increase to your staff’s hourly pay due to the new minimum wage laws, and you may be worried your profits will be flying out the door. Your concerns are definitely justified, but there are ways to control costs and maintain your bottom line.
Here are the facts: For over eight years, the federal minimum wage has been $7.25 per hour with a tipped wage of $2.13 per hour. That hasn’t changed. However, 18 states in the U.S. are increasing their own minimum wages. The new minimum wage laws are driven by the ever-rising cost of living and workers in the food service industry demanding a better living wage.
Ten states have plans in place to raise the minimum wage to $15 per hour. They include:
- New York
- Rhode Island
Eight more states are opting to increase the hourly wage based on changes in the annual cost of living. They include:
- New Jersey
- South Dakota
If you operate a restaurant in any of these states, you will need to consider the pros and cons of this increase in your minimum wage law and make changes that will help you keep profit margins in the black.
The Pros and Cons of Minimum Wage Increases
The new minimum wage laws can have a positive impact on your business. In the food service industry, there is often a wage disparity between the front of house and back of house staff. The new minimum wage law would create equal pay for all staff and cut through the traditional wage barrier, which may help create a better working environment. An increase in minimum wage may also help decrease employee turnover. Whether a server, line cook or dishwasher, your employees may feel more secure, knowing their take home pay is enough to support their families and enable them to enjoy happier lives.
On the downside, scaling raises appropriately for your staff can be a bit tricky. For example, your dishwasher and sous chef cannot have equal pay because there is a difference in the skill level required. To avoid staff resentment, you will need to use tact, diplomacy and careful consideration of each employee’s responsibilities and experience to come up with a fair wage compensation.
An obvious con to increased labor expenses is a shift in your budget, which may lead to higher menu prices. This could impact how much they tip your wait staff. Before you increase menu pricing, look for ways to improve efficiency in different areas of your operation that may help you control labor costs. An investment in technology that automates some routine processes may pay for itself through a decreased need for labor.
Increases mandated by new minimum wage laws are a win for your workers. They can also be a win for your restaurant if you find ways to adjust to the changes. Understand changes that are coming your way and put a solid plan in place to maintain your profitability.