ontario’s hospitality industry - orhma relations... · 2017. 10. 5. · industry performance...

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ONTARIO’S HOSPITALITY INDUSTRY

Ontario Restaurant Hotel & Motel Association

At A Glance: Section 1: Ontario’s Hospitality Industry Performance

Section 2: Impact of Minimum Wage Increases

Section 3: Industry Analysis – Typical Offsets to Impact of Minimum Wage Increases

Section 4: Opportunities to Offset Minimum Wage Increases

Section 5: ORHMA’s Recommendations

2600 Skymark Avenue, Suite 8-201, Mississauga, ON L4W 5B2 (905) 361-0268 (800) 668-8906

INDUSTRY PERFORMANCE Ontario’s Hospitality Industry

Figure 1: In the 1990’s Canada’s restaurant industry operated in the range of 5 to close to 10% profit margins.

Figure 2: Ontario restaurants continuously underperform the National Average and every single province. Alberta is strong with approximately double the margin performance of Ontario’s.

Figure 3: There is a similar performance within the accommodations sector. Alberta is performing better even in 2015 with the oil industry collapsing.

Figure 4: Ontario’s full service restaurant sector against Alberta and the USA: Both of these jurisdictions can afford to drop two points and still keep their doors open. Ontario does not have that luxury.

Figure 5: Limited service has a similar trend. The numbers the Ontario business owners are calculating are very real and tragic.

IMPACT OF MINIMUM WAGE INCREASE To Ontario’s Hospitality Industry

Industry will be Severely Damaged Using actual Ontario restaurant data, ORHMA calculated the significant impact of the $14 (2018) and $15 (2019) per hour to various level restaurants. Here are a few examples: Impact of Minimum Wage Increase to the Hospitality Operations - Case Studies

INDUSTRY ANALYSIS Typical Offsets to Impact the Minimum Wage Increase

Location 1: Toronto City Toronto

Number of Seats 250

Type of Business Restaurant

Additional Total Payroll Cost for new Minimum Wage (with payroll burden) $253,000

CPP Increase $9,361

EI Increase $6,199

EHT Increase $3,289

WSIB Increase $6,021

OFFSET: Elimination of Ontario Liquor Mark-Up Fee $7,112

OFFSET: Elimination of Ontario Corporate Tax $10,583

Location 2: Ottawa City Ottawa

Number of Seats 275

Type of Business Restaurant


CPP Increase $12,544

EI Increase $8,297

EHT Increase $6,424




Location 3: Niagara Falls City Niagara Falls

Number of Seats 290

Type of Business Inn / Restaurant


CPP Increase $23,641

EI Increase $15,083

EHT Increase $10,488




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A MENU OF OPPORTUNITIES To Offset Ontario’s Minimum Wage Increases

Beverage Alcohol There are approximately 17,500 licensee establishments in Ontario that can benefit from a reduction of the LCBO mark- up fee charged for licensee beverage alcohol purchases. Currently licensees do not receive a price reduction than the consumers and most pay around $10 more for a case of beer than the consumer when ordering from The Beer Store (TBS). Licensees are not offered nor can they take advantage of any special discounts, rebates or in-case promotions given to home consumers from TBS. Furthermore licensees cannot take advantage of the 10 per cent approximate discount offered to LCBO agency stores located across the province. Embedded in the full retail price of beverage alcohol is a complex regime of fees, levies, markups and taxes, both Federal and Provincial (e.g. Excise or Customs Duties and HST). The LCBO currently calculates licensee pricing by taking the base price of spirits and wine subtracting a 5 per cent discount for imported products and a 10 per cent discount for Ontario wines then adding a 6 per cent mark-up fee. (Beer and cider purchase calculations vary) In 2016 Ontario’s licensees purchased $ 518,202,000 in total beverage alcohol products from the LCBO. Included in this amount is the 6 per cent mark-up fee which equals to $20,455,344. ORHMA requests the Ontario government to reduce the 6 per cent to alleviate the

operational changes stemming from minimum wage increases.

Summary of Opportunities:

Beverage Alcohol – reduce the 6% to alleviate operational changes.

Ontario Youth Hiring Program – develop a Youth Hiring Program with wage subsidies

Employer Health Tax (EHT) - increase the EHT threshold to $1.5 million and to lower the EHT rate from the

current rate of 1.95%

Global Adjustment / Energy Costs - develop energy reduction policies conducive to mid-size and small

business.

Apprenticeship Training Tax Credit - extend the benefits of the ATTC to businesses that hire a Red Seal

recognized Baker or Cook apprentice

Small Business Tax Deductions - drop in the small business deduction rate from 4.5 per cent to 3.5 per cent on

Jan 1 2018 followed by a further reduction to 3 per cent on Jan 1 2019

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Ontario Youth Hiring Program The program would be applicable to any employee between the ages of 18 to 25 allowing employers to hire youth workers at a fifty per cent credit from the Province. Ontario’s youth unemployment has been trailing the national average (National 14 per cent vs. Ontario at 13.1 per cent in 2016). Such program will support employment growth in youth within an industry that employees 35 per cent of this workforce. ORHMA requests the provincial government to develop an Ontario Youth Hiring Program with

wage subsidies to boost youth employment and support business growth and sustainment.

Employer Health Tax (EHT) Under the Employer Health Tax Act (EHT) eligible employers in Ontario pay a health tax although over the first $400,000 of payroll threshold. Prior to the minimum wage increases that were initiated in 2004 many small business employers were under the set threshold therefore were not eligible to pay the EHT. Since 2004 minimum wages have increased by 62 per cent yet the EHT minimum threshold amount has not moved up forcing small businesses to incur payments to the EHT. ORHMA requests the Ontario government to increase the EHT threshold to $1.5 million and to

lower the EHT rate from the current rate of 1.95% this would support small business growth and

sustainment.

Tax Rebate on Global Adjustment (GA) / Energy Costs Our industry operates twenty four hours, seven days a week and both hotels and restaurants rank as the most energy intensive industry in the business and institutional sectors. The ORHMA has calculated the GA portion of an average hospitality business hydro bill at over 70% of the total. For further reference see ORHMA’s 2017 Energy Paper prepared and previously send to the Minister of Energy. ORHMA requests the Ontario government to develop energy reduction policies conducive to mid-

size and small business.

Apprenticeship Training Tax Credit (ATTC) Ontario’s tourism and hospitality sector is facing well documented challenges in developing and retaining a skilled labour force in the face of a highly competitive international tourism industry. The growth in culinary tourism and place of origin trends create economic opportunities that are required to be delivered by a capable proficient culinary workforce. Incentivizing employers through apprenticeship programs have many merits. The provincial Apprenticeship Training Tax Credit (ATTC) is currently available to employers who hire and train apprentices in certain skilled trades during the first 36 months of an apprenticeship program. The tax credit is based on salaries and wages paid to an apprentice. Qualifying businesses can claim 25 per cent of eligible expenditures (30 per cent for small businesses) made during the

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first 36 months of an apprenticeship program. The maximum credit for each apprenticeship is $5,000 per year. The maximum credit over the first 36-month period of the apprenticeship is $15,000. While the Federal Canada Apprenticeship Job Creation Tax Credit (AJCTC) for eligible apprentices includes the Red Seal Trades of Cook and Baker, Ontario’s ATTC program exempts these positions from eligibility. ORHMA requests the provincial government to extend the benefits of the ATTC to businesses that

hire a Red Seal recognized Baker or Cook apprentice to support business growth, job hiring and

develop skill talent.

Small Business Tax Deduction There are a number of opportunities embedded in the small business and corporate tax rates and are effective tools to improve the bottom line. Effective January 1st 2017 a corporation that qualified for the “Small Business Deduction” would pay income tax at the rate of 4.5 per cent in Ontario, while larger corporations of other types would pay tax at a rate of 11.5 per cent. The small business deduction is calculated by multiplying the corporation's Ontario small business income for the tax year by the small business deduction rate (7 per cent) for the year, resulting in a lower tax rate of 4.5 per cent. Businesses under $10 million with taxable capital employed are eligible. ORHMA requests a drop in the small business deduction rate from 4.5 per cent to 3.5 per cent on

Jan 1 2018 followed by a further reduction to 3 per cent on Jan 1 2019. The amount would soften

the minimum wage increase to small business.

ORHMA’s RECOMMENDATIONS To Bill 148: Fair Workplaces, Better Jobs Act, 2017

Proposed Minimum Wage Increases

A longer plan to reach the $15 per hour wage In 2014, ORHMA supported the Minimum Wage Panel’s recommendation of an annual CPI

increase setting up a five year path for businesses to plan. This was a workable and predictable

decision.

Businesses need time to plan, evaluate various concepts commit to long term contracts and

investments. Harm to business will harm employees, especially youth and workers with

disabilities workers and, of course, the consumers who will end up paying much more.

The States of New York and California operate with much higher profit margins than Ontario yet

they have given 4 to 5 and 9 years respectively in preparing the industry on the $15 per hour

wage with a suitable phase-in schedule. Ontario’s timetable of a 23 per cent increase in 6

months and 33 per cent increase in 18 months is highly aggressive.

ORHMA calls for Government to work with the business community and adopt a much longer

phase - in plan to reach the $15 per hour minimum wage, allowing businesses able time to

prepare for implementation.

Summary of Recommendations:

Proposed Minimum Wage Increases

A longer phase in plan to reach the $15 per hour wage

Freeze the “Liquor Server” minimum wage

Freeze the “Student” minimum wage

Proposed Employment Standards Act (ESA) Amendments:

Emergency and Protected Leaves – provide further clarity and add employee thresholds

Physician Notes for Absences – provide further control to limit the negative impact on operation

Enforcement – a Risk Based Enforcement and Education model

Scheduling – the industry is faced with unique demands that will be effected by new scheduling amendments

Proposed Labour Relations Act (LRA) Amendments:

Employee Contact List Given to Unions - protection of the privacy of employees

Freeze the Liquor Server Minimum Wage A unique feature of this industry is the gratuity model. The 59.4% of minimum wage increases

since 2004 have unintentionally created an inequity issue among hard working servers and

hard-working support staff such as dishwashers and cooks that earn just above the minimum

wage. This inequity that exists today will escalate further as non-tip support employees such as

cooks and dishwashers earning just above the minimum wage will be restricted or limited to

future overall wage increases. Bill 148 will intensify this issue.

Most tip workers earn double and triple of their actual wages in tips alone and there are many

references supporting this. Rightfully, this is a very sensitive issue to hear directly from

employers.

It is worth noting that tip earnings mostly calculated from total restaurant spend are expected

to automatically increase due to the upcoming menu price increases slated for 2018 and 2019.

ORHMA calls for freezing the liquor server minimum wage to support the industry and

support the many workers who deserve better equity. The issue is unique and an improved

system is required.

Freeze the Student Rate The students’ minimum wage rate is payed for those under 18 who do not work more than 28 hours per week when school is in session, or work during a school break or summer holidays. Teenagers or young adults make up 58% of all wage earners obtaining their first entry level jobs and in the most part live at home and are supported by family. These workers do not fall under poverty group needs. Their jobs broaden their interpersonal skills and provide them with development needs that support their schooling and eventually their career paths. Increasing this rate will contribute to a higher youth unemployment rate in Ontario as Ontario is currently amongst the highest in the country.

ORHMA calls for freezing the student minimum wage rate as this worker segment does not

fall under poverty group needs. Those under 18 obtain their entry level job development

setting them up for future career paths.

Proposed Employment Standards Act (ESA) Amendments

Emergency and Protected Leaves • Proposed amendments need to provide clarity around prorating the allowed days for

part-time or seasonal staff.

• The amendments will be highly difficult to track and administratively execute for small business due to limited resources. Most will be penalized for not following these complex rules. Streamlining is required here.

• To support small business, an ask to maintain the 50-employee threshold for paid emergency leaves.

Physician Notes for Absences

• There has been enough evidence in the industry that a system without employees

requiring a physician’s note on a Personal Emergency Leave (PEL) would lead to abuse.

This is not about eliminating PEL’s but about the ability to manage and control the

process that adds weight to operations impacting both employers and employees.

Enforcement • It was under the Ministry of Economic Development’s “Open for Business” program in

2010/11 that ORHMA worked with Government to drive a compliance based model by

enhancing inspection resources and resources available to employers to assist them in

understanding and meeting their obligations. The release of the 2011 Regulator’s Code

of Practice titled “Integrity in Pursuit of Compliance” aimed at changing Government’s

approach to facilitating compliance. We are concerned that the 2017 proposed

legislation will drive enforcement with untimeliness and force more unwarranted

regulation to business.

• We do believe in good employer/employee practices and adherence to the law. We

believe that a Risk Based Enforcement and Education model is more effective and has

more merit in ensuring that resources are applied to address the issues where they

need to be addressed. The Alcohol Gaming and Control Agency (AGCO) has introduced

this system in 2007 and has shown significant improvements supported by measurable

results. The AGCO risk-based approach to liquor regulation has two primary

components: risk-based licensing and risk-based enforcement including an education

component. This model can be tailored to be the Ministry of Labour’s ESA enforcement

system model.

Scheduling

• ORHMA is looking forward to participate in the upcoming sector specific committee

meetings and offering our feedback to the regulation of scheduling in an industry that is

faced with unique demand influences such as weather, unpredictable pick up and

cancellation factors that proposed amendments such as the 3 hour pay rule when

cancelling within a 48 hour time period will bring.

Proposed Labour Relations Act (LRA) Amendments

Employee Contact List Given to Unions • ORHMA fundamentally does not agree to issue the employee list at a 20 per cent staff

union support threshold without authorization. This is about protecting the privacy of

employees.

ontario’s hospitality industry - orhma relations... · 2017. 10. 5. · industry performance...

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