McDonald's Is Raising Employees' Wages, But Only at Corporate Locations
McDonald's has been feeling the heat from minimum wage protests. Now, the fast-food chain is making changes – but only at its corporate-owned locations.
As of July 1, starting pay at McDonald's will be at least $1 per hour more than local minimum wage, with other employees' wages adjusted accordingly. By the end of 2016, McDonald's says that the average hourly wage for employees will be more than $10 per hour.
The pay hike is a significant one for the company. The Wall Street Journal reports the wage increase will immediately boost the average hourly rate from the current figure of $9.01 to $9.90 come July.
In addition to the 10 percent raise, McDonald's is also allowing full- and part-time employees who have worked at McDonald's for at least a year to accrue personal paid time-off. If employees do not use the vacation, they will be paid for the value of that time.
"We are acting with a renewed sense of energy and purpose to turn our business around," McDonald's CEO Steve Easterbrook said in a statement. "We know that a motivated workforce leads to better customer service so we believe this initial step not only benefits our employees, it will improve the McDonald's restaurant experience."
However, before minimum wage activists pop the champagne and bring out the Big Macs, it is important to note that these changes will only affect employees at approximately 10 percent of McDonald's locations in the U.S. The pay hike will not directly impact workers at McDonald's franchised restaurants, which make up 90 percent of the chain's 14,000 U.S. locations.
Historically, when faced with protests regarding employee pay, McDonald's has claimed that employee pay is franchisees' responsibility.
"A big part of Mike [Andres, McDonald’s U.S. president’s] turnaround agenda in the U.S. is, ‘What are we doing around the employment image and our employee-employer relationships?’" McDonald's chief administrative officer Pete Bensen said at the UBS’s Global Consumer Conference in Boston in March. "In the U.S., 90 percent of our restaurants are franchised, so any minimum wage discussion or increase is really significantly impacting small business men and women around the U.S."
McDonald's corporate responsibility in employee issues is currently being hashed out in court. When the National Labor Relations Board (NLRB) defined McDonald's as a joint employer in labor complaints last July, the franchise industry exploded with questions and protests that the board was violating the very model upon which franchising was built. The two are now in the midst of a series of hearings before an NLRB administrative law judge in New York, Chicago and Los Angeles, with a final decision on the matter by the NLRB not expected to be released until 2016.
McDonald's is enacting one change that will impact employees at both corporate and franchised locations. The chain is expanding its Archways to Education offerings for all 750,000 employees nationally to cover the cost of high school and assist in paying for college credits and tuition.
Outside of the education program, however, it is unclear how this change will affect employees at franchised locations. McDonald's corporate has clearly stated it does not want to get involved in franchisees' employment issues. With franchisees free to make their own decisions, at least in theory, their actions now will prove just how much power the corporate franchisor holds over employees at franchised locations.
Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor.