Take a break from working on your budget to catch up on a new law that will have a huge impact on your gross operating profit. As you may have already read, on September 12th, 2006 Governor Schwarzenegger approved a bill to increase the minimum wage. The bill calls for two raises to the minimum wage over the next year and a half as follows:
-On January 1, 2007, the minimum wage for California will increase from $6.75 per hour to $7.50 per hour.
-On January 1, 2008, the minimum wage for California will increase an additional 50 cents to $8.00 per hour.
To read the bill, click on the following link: http://www.dir.ca.gov/IWC/iwc.html
The biggest area the new law will impact is in the hotel’s food and beverage departments. Most restaurants only make a profit of about 10 percent. With server and bartender labor to increase 11 percent to $7.50, it could easily squeeze out the entire profit. Hotels with high benefits (especially high workers comp rates) will be hit the hardest. Now is the time to examine your menus and consider any price increases. There is a great article on menu engineering available at http://www.restaurantowner.com/public/330.cfm . There is also a menu engineering worksheet available for download to help you out. It is also a great time to examine your labor productivity. Make sure that you have a productivity number for each position and those numbers are used to forecast, schedule, and report each week.
The earlier that you can prepare for the increase, the easier it will be to absorb the expense. It is critical to examine what positions that it will affect and have a plan for them. Typically any position under $10.00 per hour will be affected by this minimum wage increase. You may want to consider raising the wages on those positions immediately rather than waiting until January 1st. As the word about the minimum wage increase gets around, employees will start looking around to see what other hotels are paying. The hotels that wait until January 1st could risk losing some good employees to their competitors. Also, a large increase before the government requires could be a great boost for morale, especially in December when hotels are slow and work is scarce.
Link provided with permission from RestaurantOwner.com. For more information, visit http://www.restaurantowner.com/.