Firehouse Subs has jumped ahead of national health care reform by complying 12 months ahead of time with the employer mandate to make reasonable care available to full-time-equivalent employees.
Last fall, Firehouse initiated enrollment for the 120 eligible employees at its 30 company-owned units. On Jan. 1, the company began offering insurance to those who signed up. Don Fox, chief executive of Firehouse of America LLC, franchisor of the 722-unit sandwich chain, would not disclose the number of enrollees or the associated costs. He noted, however, projections suggest about 20 percent of eligible employees will accept a company’s insurance plan.
“We decided not to wait,” Fox said. “I felt it was really important to get a leg up before 2015, when the law really counts in terms of fines and penalties. We are using this year to get some real-world learning experience.”
Passed in 2010, the Affordable Care Act requires employers with more than 50 full-time-equivalent employees to offer coverage to those workers, starting Jan. 1, 2015. Under the law, full-time is defined as 30 hours a week or more. Employers who fail to offer insurance after the deadline face fines starting at $2,000 per employee.
RELATED
• Restaurants get ready for Affordable Care Act
• Preparing for health care changes: A checklist for restaurant operators
• More restaurant government news
With an average of four full-time employees working 30 hours or more a week at each of the company-owned restaurants, Firehouse will be required next year to offer insurance. Franchisees were not asked to follow suit this year, but many are watching the company’s actions to see what their experience will be in 2015, Fox said.
The Jacksonville, Fla.-based franchisor has always offered insurance to salaried managers and corporate employees, but adding 30-hour-a-week workers is raising the cost of insurance. Employees pay 20 percent of a $5,000 annual premium.
Now that health insurance is moving from a perk to a required line item in any profit-and-loss statement, operators need to tightly control employee hours, Fox said. Managers cannot let employee hours creep up to full-time and then fall back down again.
The restaurant industry predominately uses part-time employees and always will, given the uneven nature of a business where sales peak at certain times of the day, such as breakfast, lunch and dinner. Often employee hours are used as a carrot or stick for workers. Good employees get more hours; poor performers see their hours cut. Operators instead will need to have a system and solid reasoning for making people full-time or part-time, given the expense that full-time-equivalent employees will add under Obamacare, Fox said.
“We found the major thing we needed to reform in our business was the way we manage our hourly employee schedule,” he said.
To more tightly manage hours, Firehouse created three categories of workers:
1. Full-time employees who work 30 hours or more. They have a fixed scheduled. This category is reserved for top performers.
2. Part-time employees working 20 to 29 hours a week. Hours are not guaranteed, but managers try to offer workers as many hours in that range as they can.
3. New employees who work up to 19 hours week. Everyone starts at that level and must improve their performance to gain more hours. Some employees, such as students, may elect to stay at this level because they cannot commit to more hours.
“Whether you offer insurance or not, you still have to manage your workforce in some way,” Fox said. “We found we could do a better job managing employee expectations this way.”
