The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.
Darden Restaurants Inc. declined to give details but said the test is only in restaurants in four markets across the country. The test entails increasing the number of workers on part-time status, meaning they work less than 30 hours a week. Under the new health care act, companies will be required to provide health care to full-time employees by 2014. That would significantly boost labour costs for businesses.
About 75 per cent of Darden's employees are currently part-timers.
Bob McAdam, who heads government affairs and community relations for Darden, said the company is still learning from the tests. "We're not at a point where we have results," he said. McAdam also noted Darden is not alone in looking at ways to keep labour costs in check, with companies industry-wide preparing for the new regulations.
Darden, based in Orlando, Florida, has made cost cutting a priority in recent years as sales growth and traffic have stalled at its flagship chains. In the most recent fiscal quarter, the company's restaurant labour costs were 31 per cent of sales. That's down from 33 per cent three years ago.
The reduction was driven by several factors. Given the challenging job market, Darden has been able to offer lower pay rates to new hires. Bonuses for general managers have been reduced as sales have stagnated. Servers at Red Lobster are handling four tables at a time, instead of three.
And last year, the company also put workers on a tip-sharing program, meaning waiters and waitresses share their tips with other employees such as busboys and bartenders. That allows Darden to pay more workers a far lower "tip credit wage" of $2.13, rather than the federal minimum wage of $7.25 an hour.
Other restaurant chains are also looking at managing labour costs. This summer, McDonald's CFO Peter Bensen said the fast-food company was looking at the many factors that will affect health-care costs, including the number of full-time employees.
Darden operates more than 2,000 restaurants in the U.S. and Canada, including its LongHorn Steakhouse. It employs about 180,000 people.
