By Dale J. Venturini, President/CEO Rhode Island Hospitality Association

We all read about or saw the national news coverage at the end of August on fast food workers across the nation striking to demand a higher minimum wage. They asked for a 107% increase in hourly wage – from $7.25 to $15.00. In my opinion, this is not a realistic option.

To try and remain competitive and pay workers more money, many employers have chosen the illegal and unethical route of paying employees “under the table.” This occurs when an employer compensates an employee with cash or a check without taxes being removed. By not reporting an employee’s salary, an employer saves thousands of dollars on payroll taxes, insurance expenses, healthcare benefits, etc. It seems like a win for both the employer and employee who will ultimately take home more money each week.

However, this is not a viable solution to increasing hospitality wages. Beyond the illegalities of not reporting income, there are a host of long-range issues for both the employer and employee. First, the penalties for employers associated with this practice range from $100,000 for individuals or up to $500,000 for corporations for each offense discovered. Most employers don’t think they’ll get discovered as they have reached a “don’t tell” policy with their employee. However, it’s not that cut and dry.

What happens if that employee gets injured on the job and files for workers’ compensation? What if he or she loses the job and files for unemployment? What if the employee is sued for child support by an estranged spouse? Well, technically, they are filing paperwork on a job that doesn’t exist – a job that they don’t officially have. There are a host of reasons and mechanisms to cause the federal government to get involved and prosecute an employer for everything from conspiracy to commit fraud, to insurance and payroll fraud, to child support fraud.

For the employee, making this decision to accept money ‘under the table’ might seem like a good idea at the time. It puts more money in his or her pocket each week and that seems like the most important thing right? Wrong. By not reporting income, the employee jeopardized his/her ability to do things like get a mortgage as there are no W2s or paycheck stubs to verify income. This also jeopardizes an employee’s long-term benefits including social security, unemployment or the ability to file for workers’ compensation if hurt on the job. You see, all of these benefits are the result of having a job – a job that officially exists with the federal government and the IRS.

The bottom line is that nobody thinks they’ll get caught. However, that is simply not true. In fact, I have received calls from our own membership who have been caught for paying employees “under the table” and are panicked when they realize the danger they have put their business in. Enforcement is on the rise and with the recent changes in wage and hour and health care laws, the government is taking a much closer look at how employers are compensating their employees.

Remember, ignorance is not going to get your business a pass in this matter. I cannot stress enough that every operator needs to ensure that he or she is accounting for every employee on the payroll and is taking every measure necessary to comply with the law. At the end of the day, we all have to ensure that we are protecting the long term viability of our businesses.