Another View -- Keith Murphy: How Obamacare will hurt my small business, others like it
I and several other investors own a restaurant, which opened in downtown Manchester in 2007 with 22 employees. We have been successful, and my business now requires about 35 employees in the winter, peaking at about 100 in July before slowly shedding staff as my college-age servers and bartenders return to school in the fall.
Most of our employees are servers and bartenders who average between $15 and $35 per hour per shift, depending on the day of the week. Servers average about $30,000 per year, and bartenders make up to $60,000. We have two salaried management positions, and we pay our kitchen help between $8 and 13 per hour, often providing people with their first real job or giving them a needed second chance. As our current location is now built out, we have been actively searching for a second location to continue to grow our business.
For the past six months, I have been questioning both my accountant and the person who oversees my health benefits, as well as doing my own research. It has become obvious that Obamacare will force me to make some very hard decisions. Under the law, here are my options:
-- I could pay a fine of $2,000 per employee past the first 30 for not offering insurance. We peak at 100 employees every July, which means an annual fine of $140,000. This is about half of our profits, and obviously not a real option from a business standpoint. I'd be better off going to work for a national chain and letting go of the stress and 65-hour-weeks involved in running my own business.
-- I could provide my employees with a health insurance plan that exceeds a specified standard, charging them no more than 10 percent of their pay. Since I can't charge different people different amounts for the same plan, my lowest-paid employee would determine how much I could charge. That means about $1,331 per year.
I currently provide my salaried managers with health insurance at a cost of $244 per month each. Assuming that cost per employee and an average of 70 employees, I would need to pay $205,960 for insurance, of which I could charge my employees $93,170. This would reduce our profit by $112,790 each year, far too much for us to simply absorb.
-- I could stay under 50 employees. The law exempts from consideration seasonal employees, defined as a position that exists for fewer than four months. Normally I cross the 50-employee limit in March, hire gradually as my deck business takes off, and then slip back below the 50 mark in mid-October.
If I remained under 50 employees until May 1, rapidly hired the other 50 people I need for summer, and then laid them all off on Sept. 1, we would escape the Obamacare mandate. This would mean shortening my deck season by four months a year, taking a lot of money away from both myself and my employees, but I would lose a lot less than $112,790. Choosing this option means that those additional locations I have been scouting are out of the question.
-- Another ugly scenario is the most likely outcome, currently being explored by the Darden Restaurant Group, which owns the Red Lobster and Olive Garden chains. Part-time employees are exempt from the Obamacare mandate. During my busy season, my employees routinely go into overtime. If I followed in Darden's footsteps, converted all of my employees to part-time status and never let them work more than 30 hours per week, my business would be exempt. If I am forced down this road for the sake of my business's survival, it will have a devastating impact on my employees, many of whom count on working full-time hours to pay their rent, support their children and pay their college tuition.
There is no way around the fact that Obamacare will force me to cut back hours, eliminate positions and abandon plans for future growth and hiring. Multiply my story by the thousands of small businesses that are in a similar position, and the true scope of the problem becomes painfully clear. For the sake of America's small businesses and their employees, I urge you to vote for the Romney/Ryan ticket on Nov. 6.
Keith Murphy owns Murphy's Taproom and Murphy's Diner on Elm Street in Manchester.