Sunday 18 August 2019

Time to Revamp Alberta's Minimum Wage

With the recent news about the Alberta government appointing a panel to review the minimum wage for alcohol servers, my husband, Cory, was encouraging me to publish my ideas.  To be literal he said “…you write it and I will post it as a ‘guest blogger’ on my blog.”  

After some consideration I decided to dust off my blog and he is welcome to share it…. 😉

Aside from Cory, there are very few people I’ve shared this idea with. One of them though is, Doug Schweitzer. It was nearly two years ago I chatted with him about this; at the time he had taken a position on lowering the minimum wage.  While as a restaurant owner I liked the idea; politically I thought it wasn’t the best position to take.  Nor did I think any government could get away with taking away from employees.

Now, not only do I think it can be done, I think it should and needs to be done. Also, it shouldn’t be limited to those who serve alcohol.  
However, it needs to be coupled with other measures which I will outline.

First some background.
Cory and I purchased our pub/café in 2015. Just 10 days after the NDP was elected to govern, in hindsight probably not one of our wisest decisions.
When we started the minimum wage was $10.20 and $9.20 for alcohol servers.  

Each October since the minimum wage has gone up.

2015 to $11.20
2016 to $12.20
2017 to $13.60
2018 to $15.00

We are not a huge operation; we average 10 to 12 employees depending on the time of year.  And that compliment of staff hasn’t really varied greatly over the years. Looking back now we can see the actual dollar impact it has had on our business.

In 2017 our payroll expense went up $25,000.00 from the prior year. In 2018 it went up another $40,000.00.  Remember – this is without increasing the number of staff or number of hours worked by staff.

We were able to weather these increases by cutting back on other things (like less entertainment) and we were also able to increase our sales each year.  Many other restaurants couldn’t do this and have had to close.

There is only so much cutting of expenses one can undertake and it’s challenging to keep increasing your sales when you have limited market. 
I should mention in 2019 we did eliminate one position in our establishment and that is of a dishwasher. Now other staff have this added to their responsibilities.  Over last winter we also took to closing on Monday’s to reduce hours.
We won’t know the full impact of the October 2018 increase until later this year – I anticipate it will also be in the 40K range. 
All things considered, we have done well over the past four years, but the effects of past policies are still impacting the restaurant industry.

Our serving staff have also noticed an impact.  They are getting smaller tips even though they are providing the same service.  They aren’t imagining this, our system tracks the percentage of tips.  Where tips used to be in the 15-18% range, it is now 13-15%.

Servers love tips – and they deserve them!  I’m confident in saying all our bartenders and pub servers make more in tips per hour than they do with their wage.  I know this since our POS system (like every pub out there) tracks it.

Our café servers are also alcohol servers, however the sales of liquor in the café are considerably lower, the average bill is lower and as a result the tips are lower.

At the end of each shift the tips that were given to staff via credit/debit card payments are paid to the staff in cash. In 2018 our establishment paid out $94,704.40 in credit card tips in cash to staff – and we’re just one small, rural pub!!

It’s these tips that I believe hold the key to the minimum wage dilemma. 

The tips I’ve described above are what CRA calls Direct Tips. It’s up to the employee to then claim them as income on their annual tax return.  They do not appear on the employee's T4.

A second category is called Controlled Tips. This is where the employer possesses the tips and pays them to the employee at a later date. (This could be either as part of payroll cycle or a separate issuance).  These funds are then subject to Tax, CPP and EI and the income will show up on the T4 slip for the employee.

A third term I’d like to introduce you to is Declared Tips. This when provincial law requires employees to declare their Direct tips, along with the Controlled Tips.  Currently Quebec is the only province with this law.

I believe Alberta should move to a model where all tips are Declared by the employee and Controlled by the employer.  

There are benefits to both parties (and to government) and a couple drawbacks.

Employee benefits:
-          Higher reported income (good for securing mortgages and student or car loans)
-          Higher amount going to towards CPP
-          More RRSP room
-          Higher EI benefit should they become unemployed

Employer benefits:
-          Increased cash flow
-          Higher employee satisfaction

Employee drawback – No daily cash
Employer drawback – Extra paperwork

For the provincial and federal government this means more dollars going towards Tax, CPP and EI.
In Quebec employers are rebated a portion of the extra CPP and EI paid by the employer on the tips.

Alberta should introduce a Minimum Wage Range (MWR); coupled with the Quebec model of Tip reporting and the Refundable Tax Credit to employers.

If the employee works in an industry that doesn’t typically see tips or they have smaller tips, then the employer must top up the hourly rate to bring it to the top of the MWR.

Let’s say for the sake of these examples, the Minimum Wage Range is $10.00 to $15.00 per hour.

1) A bartenders’ tips, over a defined period, calculate to be $20.00/hour.  The employer then pays the $10.00 + the $20.00, for a total of $32.00/hr.

A coffee shop servers’ tips calculate to be $3.00/hr.  The employer pays the $10.00 + 3.00, but this only brings it to $13.00, so the employer would then need to add an extra $2.00 to bring it up the top of the MWR.

3) A dishwasher who receives no tips at all. The employer would be required to pay the top of the MWR, $15.00 in this scenario.

By implementing this employees’ declared income will more accurately reflect their actual financial situation to their benefit.

Employers will have benefit of lower source deductions, due to paying only on the $10.00/hr. for some and the rebate on the tips paid as wages.  This could allow them to increase the number of staff or the number of hours available to existing staff.

Government will have the benefit of higher revenues and higher compliance on individual tax returns. It would also lower the number of reviews CRA would need to conduct.

I don’t think alcohol servers should be the only ones under review, as I’ve illustrated among alcohol servers there can be a wide variance. Additionally, there are other minimum wage positions that have high tipping rates – nail salons come to mind. In my opinion, my idea of an MWR shouldn’t be industry specific.

I certain this idea will be controversial and I'm sure to hear from both business owners and employees about potential negative outcomes.  I recognize too, that implementation would be a bit of learning curve.

I still believe it can and should be done. And that the end result would be a boost to our economy with more people employed and more hours available to employees.

I will be watching with interest to see what the panel proposes and then of course, there will be the bigger question of what the government will actually implement.

- CRA info on Tips and