While this does, to some extent, help explain why approximately three out of every four jobs created this year is part-time in nature, and it will probably help some of these workers obtain a bigger subsidy when it comes to obtaining insurance on the state-run exchanges, it’s going to put a big dent in the pocketbook of these employees when it comes to other walks of like, such as their mortgage/rent, car payment, utilities, and so on.
Fast-food chain The Wendy’s Co (NASDAQ:WEN) made headlines in early January when a franchise owner in Nebraska decided to cut some 300 non-management employees’ hours in order to avoid the responsibility of providing health care to full-time employees. As you look around nowadays, you’ll notice almost exclusively part-time hiring in the fast-food sector. On the bright side, while this does help create jobs and lower the unemployment rate, it doesn’t help pad workers’ pocketbooks, since the pay is often well below full-time standards and the hours make it difficult to pick up a second job.
Other companies have done their best to come back from the brink and do right by their employees. Darden Restaurants, Inc. (NYSE:DRI), which operates Red Lobster and The Olive Garden, tinkered with the idea of hiring more part-time workers earlier in the year but noted that having their 45,000 full-time employees present was more important, since many of these employees had established relationships with the company’s regular customers.
Despite Darden Restaurants, Inc. (NYSE:DRI)’s best efforts, quite a few restaurant industry employees may find their paychecks cut in the coming months as we near the full enactment of the employer mandate in 2015. Falling paychecks do not instill a level of worker pride, which is especially concerning for fast-food restaurants.
The IRS sticks its nose in the restaurant industry and complicates matters
The other worry I have relates to comments made by the Internal Revenue Service (stop rolling your eyes!) last week that it will, on Jan. 1, stop counting automatic gratuities — the automatic 15%-20% tip that some restaurants automatically add to your bill for a party of eight or more — as tips and begin counting them as service charges.
For the consumer there’s little to no impact based on this change. In parties of eight or more at restaurants that had exercised this practice, consumers could simply choose to tip less than the restaurant would previously have automatically added onto their bill. But for the restaurant and employee, this is a big change — and a demoralizing one for the employees of select casual-dining establishments.
Put plainly, if restaurants choose to continue charging an automatic gratuity beginning in January, they’ll need to ring that transaction as a service and account for that extra sum of pay in an employee’s wages. Previously, being counted solely as a tip, it was entirely the workers’ responsibility to collect the money and report it to the IRS.
