McDonald's Plans to Boost Employee Pay, Offer Vacation Time

Applies to 90,000 Workers (Still Not Vast Majority of Staff)

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Demonstrators hold signs during a protest in front of a McDonald's in New York last September. Protesters clamoring for higher fast-food wages were arrested for blocking traffic during nationwide demonstrations.
Demonstrators hold signs during a protest in front of a McDonald's in New York last September. Protesters clamoring for higher fast-food wages were arrested for blocking traffic during nationwide demonstrations. Credit: Victor J. Blue/Bloomberg

As a planned major wage protest bears down on McDonald's this month, the company said Wednesday that it will raise pay at company-owned locations to at least $1 more than the local minimum wage and begin offering vacation benefits.

The move, which takes effect on July 1, will apply to more than 90,000 workers, the company said. It won't affect the more than 90% of restaurants that are run by franchisees. By the end of 2016, the fast-food chain expects workers at company-owned locations to earn more than $10 an hour on average.

In its pledge to improve pay and benefits, McDonald's is also joining a growing roster of major U.S. employers. In recent months, Wal-Mart, Target and TJX Cos. have all vowed to boost pay to at least $9 an hour this year. The companies are working to better retain workers and bolster productivity.

"With the economy picking up, restaurants everywhere have had higher turnover," said John Gordon, founder of Pacific Management Consulting Group in San Diego. "They don't feel like they have to stay at the same place."

The pay raise is part of a push to transform McDonald's into a modern, progressive burger company, said Peter Saleh, an analyst at Telsey Advisory Group in New York. That means good food, updated restaurants and better service, he said.

"If you're going to underpay your people, I don't see how you can have great service," he said. "They had to do something."

The company has also struggled with millennials, who are increasingly used to fresher options and are often said to prefer companies with positive social impacts. Its latest ad campaign has emphasized positivity, but an employee walkout and protest over McDonald's wages on April 15 isn't likely going to help the chain's image with young consumers.

McDonald's has been grappling with sluggish sales in its home market and a health scare in Asia, where a supplier was accused of repackaging old meat after it was past its expiration date. U.S. same-store sales fell 4% in February, a worse decline than analysts had predicted.

McDonald's will now let workers earn time off annually once they've worked a year at the company, it said in its announcement. An employee who works 20 hours a week, for example, could be eligible for about 20 hours of paid time off per year.

It will also expand its Archways to Opportunities education program, which helps employees complete high school and pay for college tuition. The assistance will be offered to workers at both company-owned and independent restaurants. McDonald's has about 750,000 employees total in the U.S.

The wages increase, meanwhile, will apply to workers all the way up to restaurant managers, based on their tenure and job performance.

Though the pay hike doesn't affect most McDonald's workers, it marks a dramatic early move for new Chief Executive Officer Steve Easterbrook. After his promotion to the top job last month, Mr. Easterbrook has been working to reignite growth at the fast-food chain. Other efforts include a test of all-day breakfast at San Diego restaurants and a touch-screen system that lets customers customize burgers and sandwiches.

"We've been working on a comprehensive benefits package for our employees," Mr. Easterbrook said in the statement. "We've listened to our employees and learned that -- in addition to increased wages -- paid personal leave and financial assistance for completing their education would make a real difference in their careers and lives."

~ Bloomberg News ~

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