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This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.
Average hourly earnings for restaurant workers rose by 50 cents over the last year, starting at $17.18 in January 2023 and ending at $17.68 in December 2023. That’s according to the Square Payroll Index data, which uses Square labor management and payroll processing solutions to track wage growth in the industry.
While this increase isn’t as high as the $22 minimum wage hike restaurant owners were bracing for at the beginning of 2023, rising pay requirements for restaurant workers don’t show signs of slowing. Already, half of the U.S. states plan to boost their general minimum wage in 2024, ranging from $10.30 to $16.28 by the end of the year. And some regions have gone on to take this a step further, with industry-specific wage requirements for food and beverage workers. Officials in California, a known trailblazer for employment laws and labor policy, for instance, recently passed legislation that will require some qualifying fast-food restaurant chains to pay workers a minimum of $20 an hour starting in April 2024. Shortly after, Chicago city officials voted to eliminate subminimum wages for tipped workers, setting rules to increase base pay in a phased approach year-over-year through 2028.
Whether your restaurant is in Illinois, California, or elsewhere, knowing the latest minimum wage regulations and how restaurant pay is trending across regions can help you ensure you’re following the law. Tracking this information can also let you know what a competitive pay rate is for your employees, which can help motivate them to stay. Let’s dive into what these laws entail and what they may signal to restaurant owners across regions over the next year.
Understanding California’s latest restaurant industry wage legislation
In September 2023, California Governor Gavin Newsom signed AB 1228, which will increase the minimum wage for fast-food restaurant workers in California to $20 an hour beginning April 1, 2024. The law further states that the minimum wage for fast-food employees will increase each year until 2029, based on the Consumer Price Index. According to the law, fast-food restaurants are defined as businesses that have more than 60 locations nationally under the same brand and “provid[e] food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service.” Think of your typical national, 60+ location QSR franchise.
What does this mean for affected fast-food restaurant owners? Now is the time to take a closer look at your labor costs and understand what measures you can take to comfortably make this change by the deadline. As part of this preparation, you may choose to audit your current expenses, increase the best-selling menu items, or automate tasks to offset production costs.
Legal experts who are familiar with the industry are encouraging restaurant owners to prepare for potential additional wage increases and industry regulation changes that will likely follow in the future, as this law also creates the Fast Food Council within the Department of Industrial Relations. The Fast Food Council will consist of nine members, a mix of fast-food restaurant industry members, owners, employees, employee advocates, and one unaffiliated member, all appointed by the governor and legislative representatives. The council will be able to recommend additional workplace regulations that address health, safety, and employment standards for covered fast-food restaurants.
What to know about Chicago’s One Fair Wage ordinance
Shortly after California’s legislation passed, the Chicago City Council approved the One Fair Wage ordinance, which eliminates a subminimum wage for tipped workers. While the current minimum wage for most Chicago workers is $15.80, the subminimum wage is $9.00–9.48 per hour. This new law will increase the minimum wage for tipped workers by 8% starting in July 2024 and will continue to go up by 8% each year until 2028.
This legislation makes Chicago the largest city to remove the subminimum wage for tipped workers, following California and several other states, including Washington, Oregon, Nevada, Montana, Alaska, and Minnesota, in requiring employers to ensure that their workers earn at least full minimum wage, regardless of whether they are tipped workers or not.
Understanding evolving city and state labor and wage regulations is a feat for any restaurant owner. Determining the next steps to take to ensure your business and employees are set up for success can be a whole extra hurdle. To make upcoming changes like these easier on your business however, exploring innovative solutions such as dynamic pricing strategies to optimize revenue and keeping track of all your business expenses as you launch, run and grow can put you in a stronger, more resilient position for the future.