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Adapting to Changing Minimum Wage Landscapes in the Restaurant Industry

Adapting to Changing Minimum Wage Landscapes in the Restaurant Industry

Nate Lozier
Nate Lozier

With many states implementing new labor laws on Jan 1 of 2024 or shortly after, here’s are some things to review for your restaurant’s payroll, accounting, and taxes, including what you’re required to provide your employees, and changes they’re required to make.

Introduction

With nearly half of the U.S. states implementing minimum wage increases in 2024, business operators across the country are assessing strategies to adapt the increase in labor cost to remain profitable. For restaurants big and small, the change in minimum wage presents changes not just to labor costs, but navigating a complex web of regulations and compliance issues. In this article, we’ll explain the changes to minimum wages in 2024, and explore some of the effective strategies to manage labor costs in the face of escalating minimum wage.

Understanding Minimum Wage Increases

Several states and cities are currently undergoing minimum wage increases set for 2024, contributing to a complex and varied wage landscape across the nation. While the federal minimum wage remains at $7.25 per hour, any city, county, or state laws take precedent over the federal rate. For the most up-to-date information on your state or city, check the Department of Labor State Minimum Wage webpage for the most up to date rate or expected change.

Some restaurant workers have been given a more specific wage increase that benefit them beyond the minimum wage. In California, all fast food employees – working for brands with at least 60 locations – will be given a state-mandated minimum wage of $20. The bill, set to take effect in April, will impact over 500,000 fast food employees.

Rising Minimum Wage on Restaurants and Employees

For restaurant owners, hourly wages constitute a significant portion of labor costs, representing one of the most substantial expenses. An upswing in the minimum wage for restaurant workers translates to increased costs, resulting in immediate profit reduction. Larger staff numbers intensify the burden on payroll.

In addition to mandated government-driven labor cost hikes, it becomes imperative to consider providing raises to the entire team, ensuring a fair pay gap between experienced staff and those earning the minimum wage. Adjustments to payroll are also necessary to accommodate higher contributions to workers’ compensation and liability insurance.

The increase in minimum wage has both immediate and long-term impacts on business. The challenge lies in devising strategies to navigate these changes successfully.

GUIDE

How To Reduce Restaurant Labor Costs

Strategies for Navigating Increased Labor Costs

Like any business with minimum wage employees, many restaurants will be forced to raise their menu prices and pass off some of their cost to their consumers in order to maintain profitability. With consumer confidence recently hitting a five-month high, this price adjustment should have little impact on restaurant patronage, particularly in QSR and fast casual restaurants, who employ more minimum wage workers.

Amidst regulatory complications tied to tipped, hourly, and various labor types, restaurant operations software proves instrumental in ensuring compliance with diverse minimum wage laws, offering an automated alternative to manual tracking methods.

This software also allows managers to regularly reviewing labor reports as a fundamental way to identify areas to reduce costs. Leveraging POS sales data, restaurant owners can forecast labor needs, adjusting shifts based on daily trends, weather, and local events to minimize labor costs over time.

Another area to predict as best possible is employee overtime. Through detailed reports on employee hours, shifts, and associated pay, owners gain insights to reduce overtime situations, ultimately improving cost-effectiveness and employee satisfaction.

The adoption of all-in-one workforce solutions emerges as a game-changer in reducing labor costs. Automation of manual tasks, seamless schedule management, and the ability to compare theoretical versus actual labor costs empower restaurant owners with valuable insights derived from POS systems and sales data.

 

Employee Retention and the Importance of Recognition

Employee retention is a crucial aspect of minimizing turnover costs, particularly in the restaurant industry, where turnover is high. Proper training, recognition programs, and avenues for professional growth are a few of the major key components of a successful retention strategy. By prioritizing the well-being and development of the workforce, restaurants can build a more sustainable and resilient business model.

Comprehensive staff training is also an important part of building a successful restaurant environment. Beyond role-specific training, employees are equipped with essential knowledge spanning POS usage, customer service standards, and company policies, reducing the need for last-minute replacements and enhancing overall efficiency.

Conclusion

Successfully navigating labor costs amidst rising minimum wages requires a holistic approach. By combining technology solutions, proactive scheduling, staff training, and employee retention strategies, restaurants can thrive in an industry marked by constant change. Embracing data-driven decision-making through technology is key to implementing effective changes and improvements. For those still managing workforce data in multiple Excel files, investing in a restaurant management technology solution is a prudent step towards streamlined operations and sustained success.

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