The struggle to keep labor costs in check became much more complicated in 2015. Operators winced as they saw jurisdictions adopt higher minimum wages, paid sick leave, penalties for short-term scheduling changes, and more.
Among the challenges that was set for the industry was the Obama Administration’s proposal in June to greatly expand the scope of salaried managers who qualify for overtime pay. Opponents warn the increased costs could run into the billions. The final regulations were scheduled to be issued this year, but Washington, D.c., is now expected to wait until after next November’s elections, knowing how controversial the proposals might be.
I don’t really understand the fascination with salaries for this kind of work. We dropped the salaried thing ages ago. On the one hand you theoretically get a fixed cost for a manager to work however many hours it takes… on the other hand the manager has zero incentive to put in extra hours when needed.
When we made the change we went with an hourly rate plus bonus which was calculated to get the manager the same income if they worked 50 hours but gives them an upside if they excel or really put in the hours in a crunch and saves us money if they work less hours.
Now that we have had the system in place for a decade the crew knows how it works and I have never looked back.
Yes, we pay overtime. Not a problem depending on how you set your wage. For example compare a manager who makes 50K per year on salary and is expected to work 50 hours a week 50 weeks per year to a manager who makes $17.50 per hour (which comes to 35K for 40 hours @ 50 weeks) and works another 10 hours overtime EVERY week. They come out about the same. If they do not always put in those extra 10 hours you save money on the wage model. If they are working more than 10 over time in a crunch, I would argue that they deserve the extra money.
I would also argue that the Salary is just as likely to kill your labor costs because it creates an incentive for the manager to cut out when he can with no loss of pay and still pay someone else to be there. I had managers that figured out how to only be around 40 hours or even 35 in the off season… but then I was paying someone else to be there in addition to the salary.
With the laws the way they are today, you can’t have more than one salaried manager at a typical delco. Even if you did not scale your wage the way I describe the incremental cost of the OT for that one person is not going to be the driving factor in your labor. Assuming that somebody is going to be paid to do whatever it is they do in those 10 hours, the example above 10 hours OT X 50 weeks = 500 hours X OT factor of $8.75 = a grand total of $4375 per year…
So no. This is not something that is likely to get labor cost out of control if managed correctly.
Beyond all that, the way I do it with wage and bonus, the OT rate is only based on the wage portion so the difference is even less. As it turns out, my managers have been happy to work 40 hours a week much of the year and then really crank and make a big check for the 6-8 weeks where we do out biggest numbers. An additional advantage is that we do not need to hire for that bubble, we just cover it with OT which works a LOT better than finding and training people we don’t really need the rest of the year.
Cynically, I found it easier to get managers to cut back hours if they were tending to take more OT than I am comfortable with than it was to ensure they were working the hours agreed to for the salary every week of the year. I had issues with short hours (from the agreed total) with every salaried manager for the first 7-8 years and only ever once on the excessive OT with a wage manager. Even then I was able to offset it in the bonus so it cost me nothing.
I agree with bodegahwy. I do not pay salary except to myself. Both of my managers have been hourly + bonus and i gladly pay OT if i need it.
Also, if we are busy enough to need OT, then i need people who do not need to be constantly asking questions because they are new. I need experienced people who know what needs to be done. And that knowledge is worth 10x the OT pay when it comes to crunch time.
The older i get, the less i feel salary is a good thing in our industry. I would rather pay higher wages on hourly, and save the labor when we are slow. Then i can train up new employee’s during the slower times, that gives them experience and allows me the time i need to see if they will be able to handle the busier times by themselves.
Plus it is a morale boost for younger employee’s who want to move up and learn new things, because they will get a pay raise when they start running shifts. And the older managers get to take time off, or go on vacation without any issues because we have people who can handle things while they are gone.
We cut out the salary thing about 10 years ago or so also. California has a bunch of laws that require you to pay overtime on salary anyway. There are some exceptions but you would need a law degree to sort them out. So its all hourly for us.
In California if you do common labor task ( making pizzas, taking orders ect. ) for more than 51% of your time you cannot be salary. Our managers do these task upwards of 80% of there time. Just about every fast food chain out has had a lawsuit regarding this in the last 10 years. They would put the assistants on salary and require them to work 60 hours a week.
Back in the 80’s I worked at an auto parts store as an assistant. My “salary” was $315 a week and I had to work 60 hours a week. It was about getting experience for me back then. I didn’t care how much I worked or how much I got paid. If the store was over budget on payroll and was still needed stuff to be done, I would clock out and do it on my own time.
Nowadays it seems like people won’t do anything unless they are properly getting compensated. My wife and I ( mostly my wife ) volunteer at the local high school marching band boosters. It seems like every year its harder and harder to find volunteers. People can’t be bothered. Out daughter graduated 5 years ago and we still help out.
On a similar note, I have an experiment in the works starting New Years Day. Here in California our minimum wage will be going up to $10 per hour. The proponents of this say it will only help business because people will now have more money to spend and sales will go up. I have increased prices every time wages have gone up. But I didn’t this time. So if the proponents are right my sales will EXPLODE. We’ll see how it goes.
On another note, we finished all of our Obama Care stuff up last week. Out of 127 employees we had 45 who qualified for insurance ( over 30 hours ) Out of the 45 only 7 took the insurance.
We ended up hiring an agent from Paychex that tracks who and who does not qualify for health care. He puts all the paperwork together and also met with everyone to explain things and help them fill out the forms. He charges $100 a month and guarantees that we are compliant.
No. If you think otherwise have at it and good luck but I suggest you ask your CPA first. as PP explained above it is even questionable whether you can have the one.
Actually it goes farther back than that. When I started as a manager trainee at Dominos in the Summer of 1979 they had just dropped salary compensation for assistant managers when they were hit with a class action lawsuit over OT wages. The other trainees all got checks for the OT they had worked over the last year or so up until shortly before I started… That puts the history of the issue back more than 35 years.
Bottom line is you can’t rely on salary compensation to be a money saver. It isn’t.
When we had managers on salary (with bonus) we had the same problem as Steve - paying 2 people to do one job - manager is gone way too often and very skilled at milking the system.
How do you keep the hourly managers from milking the clock? Are you including their labor in their goal for bonus?
How about hourly GM’s responding to issues at the store when they are off? How can you ask an hourly employee to work (answer calls and deal with problems) when they are not clocked in?
Accountability is an issue for managers no matter how they get paid. Perhaps a salaried manager can’t milk the clock in the sense that they don’t get paid more, but they can certainly milk the owner in ways that cost even more. Either way, you need to have systems that ensure the work is being done that what owner is paying to have it done makes sense.
“How do you keep the hourly managers from milking the clock?”
You know how many people it takes to run a shift in your store? This is no different than any other oversight issue. You have to watch to ensure that the schedule makes sense. You might have the same issue with salaried managers in that some managers will keep an extra cook around so they don’t have to work as hard.
Salaried managers milk the clock by taking time away and paying someone else to work when they should be or by overstaffing so they can “manage”. They get paid whether they are there or not. A least the wage employee has to be there to get paid!
“Are you including their labor in their goal for bonus?”
Absolutely.
“How about hourly GM’s responding to issues at the store when they are off?”
It is part of their job and what they get paid for. There really is no difference here between hourly and salary. If they are in a position of responsibility they have to meet those needs.
“How can you ask an hourly employee to work (answer calls and deal with problems) when they are not clocked in?”
Why do you think they would not be clocked in? If they come in when they are off to deal with things they get paid. Period.
With regard to being clocked in, I was asking about the time where they aren’t in the store.
For example, do you expect your GM to answer his phone when he is off work? I assume all problems don’t require him to come into the store to resolve, but take time from home to deal with.
Don’t get me wrong, Im in the “pay hourly” camp. But I find it difficult to reconcile that with wanting them to be “on call” all the time.
The short answer is yes. How much that has to happen is a reflection on the job he does training his assistant managers. Also, he gets bonused on exactly the kinds of things that he might get calls about… so in that sense he is paid for that work. I expect assistant managers to answer the phone too. If another employee is sick or has an emergency or no-shows, this is the group that I expect to step up and get it covered. (Another argument for wage over salary is that at least the manager that has to do this gets paid extra for it. Isn’t that more fair than dumping it on a salaried person who gets nothing extra when it happens?) I don’t see the distinction between salary and wage that makes it OK to call one and not the other.
Think about what those calls are likely to be about: No show employees? Money came out wrong? Ran out of something? Trouble with a customer? How do we handle something? How do we do something? Are any of those things that the manager does not have at least influence on if not outright control of through staff training? A manager who is doing his job well will get a LOT less calls!
As to being “on call”… well, they are and they aren’t. If they are getting calls from the store for things the crew should be able to handle… then now we know what to work on… on the other hand there are situations that the GM should be at least aware of and taking a phone call is not such a big deal.
I don’t disagree at all. Just playing devils advocate a bit.
Salaried managers have never made sense to me for this business. I think back to my previous non-restaurant business life where I was paid salary. It made sense to me then - because I was doing a job that didn’t always require my presence at any specific time. I was being paid to do a job - and if it took me 20 hours one week and 60 hours the next, then that was fine with everyone. As long as the job was getting done.
As someone said above - it really is like paying 2 people to do the same job at times. And the bad thing about it, you don’t really see that once you’ve agreed to the salaried position.
So here is a question. Has anyone transitioned from salaried to hourly - how did it go? Assume the expected hours as salaried was 50, and the scheduled hours as hours will be 50, and the rate of pay stays exactly the same.