How Health Care Reform and Minimum Wage Changes will Affect Your Hospitality Company

Hospitality Recruiting Industry News Update

This is a milestone year for changes in health insurance coverage, as the federally mandated Patient Protection and Affordable Care Act (PPACA) takes effect.

On Jan. 29. President Obama announced he would use an executive order to raise the minimum wage from $7.25 to $10 for those working on new federal contracts – marking another legal benchmark that will impact the nation’s businesses.

In both areas, the hospitality industry will be among the most significantly affected. What are the ramifications for your business and how can you be assured that you’re ready to meet them?

A Recap of the PPACA

The struggle to provide adequate employee health insurance has reached new heights in the past decade. Now that the PPACA is law, it’s important for hospitality employers to understand its key premises.

  • Generally, the law applies to employers with 50 or more full-time employees (FTEs). An FTE is defined as an individual who works an average of 30 or more hours a week.
  • Employers are required to provide “minimum essential” and “affordable” coverage. Under the PPACA, “minimum” is defined as 60 percent of the actuarial value of the cost of benefits. In defining “affordable,” the act states that the premium that an employee pays for coverage cannot exceed 9.5 percent of their household income.
  • There’s more than one way to hit the 50-FTE threshold. Part-time employees are included as “partial employees.” Companies must conduct careful head counts to see where they stand. For instance, if an employer has 25 FTEs and 50 employees who work half time, they are considered for purposes of the PPACA to have 50 FTEs and therefore are subject to a penalty if coverage is not provided.
  • IRS and ERISA controlled-group principles apply. Parent, brother and sister companies are counted as one. So if two restaurants with 25 FTEs each are separately incorporated but owned by the same person or company, those properties meet the 50-employee threshold.

Research shows that 46 percent of hospitality industry employers will experience cost increases of at least 3 percent this year in order to achieve PPACA compliance. They are among the most severely impacted industries. By contrast, only 24 percent of government employers anticipate similar increases.

Minimum Wage Update

As he introduced minimum wage hikes for federal contract workers, President Obama said he hoped Congress would apply the increase to all Americans. Currently, 1.8 million people make minimum wage, while another 10 million earn within $1 per hour more. A large number of unions within the hospitality industry peg their baselines wages to the minimum wage.

  • Businesses with annual gross sales of at least $500,000 are subject to Fair Labor Standards Act (FLSA) regulations including those pertinent to the minimum wage. Of course, establishments also must comply with state minimum-wage levels.
  • If tipped employees’ combined wages and tips fall short of minimum wage, their employer is required to make up the difference. When last measured in mid-2012, the average tipped restaurant employee in the U.S. earned $11.82 per hour.

To stay abreast of these and other legal requirements pertinent to your hospitality business, read our related posts or contact the industry workforce experts at Horizon Hospitality today. If you are looking for a hospitality recruiter, contact us today.


Leave a Reply

Your email address will not be published. Required fields are marked *