Minimum Wage

Pay Increase = Price Increase

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In the world of compensation strategy and design, some things are highly predictable. When an expense goes up, there must be a correlating financial adjustment in order to pay for that increased expense. This adjustment could be realized through one of a few options, which include the potential reduction of other expenses, or the increase of other revenue streams in order to cover increased costs.

With the implementation of minimum wage increases in Ontario, we are starting to see how the required cost adjustments are being achieved. According to numerous media reports, the restaurant industry is offsetting the increase in payroll expenses by raising product prices – a cost that is ultimately absorbed by the consumer.

Click here to read about the impact of minimum wage on consumer pricing.

As noted in the article, the increase in consumer price adjustments can be connected directly to minimum wage increases for employees. It is interesting to note, however, that the extent of the increase in employer expenses is significantly greater than expected. It seems that many employers in Ontario may not have taken into account some of the additional compensation-related cost increases that have resulted from legislation imposing a higher minimum wage.

This article provides us with a good example of how and why compensation planning must take into account more than just wage or salary increases.

No matter how the financial adjustment is realized, good compensation strategies will require careful planning and timing if they are to be implemented successfully – and this includes a broad range of compensation-related considerations.

Additional minimum wage increases are a known quantity for all businesses in Ontario. With this in mind, businesses need also to ensure that thoughtful compensation planning (taking all cost-related expenses into consideration) is a known quantity – one that feeds into rational and reasonable economic responses.

 

Discussion Questions:

  1. How would you design an affordable compensation strategy that supports on-going minimum wage increases over the next two years?
  2. What types of rewards or incentives could you offer to employees that are cost neutral?
  3. From your perspective, do restaurant owners have other options to pay for increased wages besides increasing menu prices? Explain your rationale.

 

Reaping What Is Sown

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‘For every action, there is an equal and opposite reaction’. This famous mathematical law is handed down to us from history by Isaac Newton, who developed it in the late 17th century. In the early 21st century, it seems this law continues to prevail, even when applied to the context of modern employee and labour relations strategies.

In January 2018, revisions to the Employment Standards Act of Ontario were implemented, resulting in numerous changes that impact the lives of workers in this province. In its messaging prior to the implementation of these changes, the provincial government stated that the revisions to the legislation were required in order to ensure that ‘workers in Ontario have the right to strong protections at work’.

In the following months, there continues to be on-going media coverage focused primarily on the increases to the minimum wage and subsequent reactions to this change. Most of the media coverage has not painted a positive picture of employer conduct in Ontario, especially as it relates to the food-service and restaurant industries.

A recent example of this type of employer conduct has resulted in the decision by employees of the Rainforest Café in Niagara Falls to unionize.

Click here to read a brief news report published by Labour Reporter.

Click here to read a more detailed article published by the St. Catharines Standard.

As we have learned from our industrial relations studies, there are a number of theories explaining why employees choose to join unions. We need to set those theories aside for a moment in order to consider the reality of the impact of poor employer conduct on employees, and the ensuing results.

When employers continue to engage in conduct that appears to contradict the law (such as dipping into employee earnings (tips) in order to subsidize mandatory minimum wages) it should come as no surprise that employees will react by finding a way to ensure the increased protections they were promised. Unionization does not happen in a vacuum. When promises are broken by an employer, employees will look beyond the boundaries of their existing workplace for support and legal strength.

Employees in Ontario have a reasonable expectation to receive their wages in accordance with the law. When this does not happen, the employer should expect to receive the union they deserve as a result.

 

Discussion Questions:

  1. If you were an employee of the Rainforest Café, what impact would the vote to unionize have on you?
  2. What steps could the employer have taken to avoid a vote for unionization?
  3. Identify the positive benefits that the vote to unionize may have on both the employees and the employer in this case.
  4. Do you agree or disagree with the vote taken by the workers of the Rainforest Café? Explain your rationale.

Coffee With A Side of Bullying

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In Ontario, the Occupational Health and Safety Act includes recent amendments to address incidents of harassment, sexual harassment, and violence in the workplace. The importance of these amendments lies in the presumption that workplaces need to be safe, physically, and that employees can feel safe, psychologically.

Under the Occupational Health and Safety Act – Section 1, we know that the definition of workplace harassment means a person or persons “engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably to be known to be unwelcome.” The same section of the act also identifies that “reasonable managerial actions” taken to direct workers is not or does not constitute workplace harassment.

When there is an allegation of harassment, under the Occupational Health and Safety Act, the employer must investigate and report on the results of that investigation. Further, an employee has the right to bring a complaint forward for investigation, based on their personal belief that they are being harassed.

These legislative parameters form an interesting backdrop when looking at the recent and on-going allegations of bullying by Tim Horton’s franchise owners. These are owner-employers who appear to have taken punitive measures against employees resulting from the implementation of amendments to the provincial Employment Standards Act.

Specifically, there has been much media focus on certain franchise owners, who have implemented cuts to benefits and working conditions for employees in a manner that has been reported as bullying. Bullying, while not defined specifically in legislation, falls into the category of workplace harassment.

Click here to read an article about the allegations of bullying Tim Horton’s employees.

In response to these allegations, the Ottawa District Labour Council set up a bullying hotline for individuals to report those employers who are engaged in these bullying practices. In turn, the labour council will publish the names of these bullying employers in order to provide a forum for public shaming of their actions.

Click here to read about the bullying hotline.

From the employer side, in this case, the justification for these actions comes from a need to balance the financial books. In order to provide the increases in wages, the employer appears to be implementing cuts in other areas of compensation so as not to suffer any additional losses in profits. Is it possible that these actions are reasonable and not, in fact, harassing or bullying?

Unfortunately, what seems to be missing is the ability of franchise employees to take reasonable and legitimate steps to report the perceived bullying behaviour on the part of their employer. In the absence of an HR department, reporting structures that include legislative requirements, or clear policies and procedures, it seems that small business and franchise employees continue to have limited options for potential support or resolution.

In these cases, employees often have one of two choices – either they comply with the employer’s demands or they quit. Neither option appears to support the reasonable and legitimate right to feel safe.

Discussion Questions:

  1. As a Human Resources consultant for a small business or a franchise, what types of procedures would you put into place that allow employees to report incidents of bullying or harassment? Be specific.
  2. If you were an employee in a Tim Horton’s franchise, how would you respond to the cuts to your work-related benefits? What actions would you take?
  3. Do you agree that the cuts to employee benefits implemented by some Tim Horton’s franchises are a form of harassment, as identified in Ontario’s Occupational Health and Safety Act? Explain your rationale.

Too Much? Too Soon?

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Your supervisor calls you into their office and lets you know that, over the next 18 months, your current wage will increase by 32%. Guaranteed. You skip out of the office imagining how you will spend your new fortune.

This is the good news story that a portion of Ontario’s workforce received, when the provincial government announced that the current minimum wage rate will be increased to $15 per hour by the year 2019. Based on the percentage calculations alone, this is an incredible boost to a targeted segment of Ontario’s workers who currently earn the $11.40 per hour minimum wage.

This significant wage increase comes from the provincial government’s Changing Workplaces review. As a result, the province has moved to the implementation of changes to existing employment laws that are intended to reshape the present and future of Ontario’s workforce challenges.

Click here to read a summary of the changes.

While promoted as a positive and much needed amendment, the proposed wage increases have not been met with an equally positive reaction from the small and independent business communities in Ontario.

Click to read reactions from the Canadian Federation of Independent Business from an HR perspective.

Click to read a news article about the reaction from small businesses.

It is interesting to note that the negative reactions seem not to be focused on the amount of the wage increase. Instead, the primary concerns are focused on the pace of implementing the increases over a very short period of time. How will small employers, with limited infrastructure and support, be able to adjust all of their compensation considerations within the time limit of the next eighteen months?

This is a question that will go beyond the small business community in Ontario. All employers in the province will have to look at adjustments to their overall compensation strategies and monetary policies. Many employers will have to engage in a potentially painful process to justify increasing payroll costs that they may no longer be able to carry or afford.

There is no doubt that turbulent times are ahead for anyone working in the field of compensation strategy and structure. Hopefully, the end result will reinforce a good news story once we get there.

Discussion Questions:

  1. What strategies or actions do you think small and independent business owners will have to implement in order to pay the $15 per hour minimum wage by January 2019?
  2. From a compensation planning perspective, how will the minimum wage increase impact mid-size employers in Ontario?
  3. As the minimum wage rates are adjusted in Ontario, do you expect that your own salary/wages will be adjusted accordingly? Explain your rationale.

 

 

Profit Sharing Tips

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Think about the last time you went for dinner at a restaurant. At the end of your meal, you paid for the food and, probably, you added a little extra in the form of a gratuity for the server. This ‘little extra’, the tip, was supposed to reward the person who served you well. If they did not provide good service to you, perhaps the tip was a bit smaller, based on your determination of the level of service and what you could afford.

While this is an accepted practice, the concept of rewarding only one person for your full dining experience seems to be missing the mark from a performance pay design perspective. The server is not the only person involved in making sure that you have a good meal. There is usually a large group of people behind the server, ensuring that your food is prepared, the plates are clean, and the ambiance is welcoming. Why then should only one person receive an extra reward, if the service is based on the collective efforts of the restaurant staff?

A recent article explores the changing concepts of tipping in the Canadian food service industry. In an industry that usually pays low hourly or minimum wages, there is a movement to shift from the single reward receiver to group reward recognition based on the principles of profit sharing.

Click here to read the article.

As noted in the article, rather than having individual servers receiving tips, the Earls chain has implemented a percentage surcharge on the final bill. This ‘hospitality’ fee of 16% is then shared between all of the restaurant’s employees and helps to equalize the monetary incentives for everyone.

When considering group pay choices, a simple sharing of the rewards may be the answer to the need for increased performance and increased pay.

Discussion Questions:

  1. Would you tip differently if you knew that the amount of gratuity was shared between all of the employees in a restaurant?
  2. How would you design a group performance pay plan for a restaurant?
  3. What impact would a group profit sharing plan in a restaurant have on an individual server’s performance?