By Dale J. Venturini, President/CEO Rhode Island Hospitality Association
Are you running your business the right way? I’m not referring to customer service, your marketing strategy, or your establishment’s mission statement and philosophy. When I ask if you’re running your business the right way, I want to know if your operation conforms to the absolute letter of the law.
Many of you may think that’s a ridiculous question to ask. After all, we’re all hardworking, honest, law-abiding citizens. Although we run into the occasional bad apple, we as business owners and operators understand there is significantly more to lose than to gain by skirting the rules. Still, the inherent intricacies of labor law, the tax code, and wage/hour guidelines are so complex that you may actually be in violation even if you think you are in compliance.
Every year, the RI Hospitality Association (RIHA) holds special seminars dedicated to these topics. Hotel operators and restaurant owners, industry veterans and first time rookies alike come together to question our panel of labor experts and regulators who have agreed to share their knowledge. It usually turns out to be a lively discussion because many of the people in attendance quickly discover that even though they’re acting in good faith, they may not technically be following the letter of the law.
As responsible corporate citizens, it is incumbent that we make every effort to ensure we’re not breaking any rules. Never has this been truer than it is today. The hospitality community, like many industries, is under a microscope. As the government continues to search for new ways to generate much needed revenue, there has been a renewed focus on enforcement and fines to bridge the budget gap. That means the enforcement labor laws, tax codes and wage/hour guidelines, among others.
Think you are on the up and up? I have a few questions for you.
- Do you know why a service charge that you automatically include on a bill is taxed while a voluntary gratuity added by a guest does not need to be taxed?
- How much of a service charge, if any, are you required to remit back to your employees?
- If you operate more than one establishment, how do you pay the wage of an employee who starts his or her day at one location but finishes it working at another?
- Are TRAC agreements still in effect? What is the proper way to handle tip pooling and tip credits?
- How do you accurately calculate the cost of employer-covered healthcare?
As I write this, my goal is not to make anybody nervous. However, maybe you should be. Over the last several years, it’s safe to say the hospitality community has been targeted a number of times. The most high profile example is this year’s attempt by Governor Chafee to raise the meals and beverage tax as a quick way to generate almost $40 million dollars, all without any regard for the impact it would have on hardworking hospitality professionals.
What others may not realize is that we are seeing a sharp uptick in hospitality-related audits – some of which have already affected RIHA membership. These audits can result in fines which total hundreds of thousands of dollars. How can you protect yourself and your business? My advice: educate yourself and your staff. RIHA has many vital resources to help you navigate the complex laws that govern our industry, and we can help you get the answers you need.
For information on October’s RIHA seminar regarding Wage & Hour, Taxation, Labor Laws and Tip Guidelines, please visit RIHospitality.org.