McDonald's, the world's largest fast-food chain, has withdrawn from the National Restaurant Association (NRA), which represents the U.S. restaurant industry, amid disagreements over the way workers are paid. The exit of McDonald's, the association's largest member, is expected to disrupt its activities.
According to Bloomberg News on the 3rd (local time), Chris O'Cull, an analyst at U.S. investment bank Stifel Financial, noted in a memo sent to clients that McDonald's management communicated this decision during a recent meeting with Wall Street analysts. McDonald's has declined to comment on the matter.
McDonald's is known to have failed to reconcile differences with the National Restaurant Association over the method of wage compensation. The association supports the 'tipped wages' system, in which employees cover part of the legally mandated minimum wage with tips, but McDonald's opposes it. Under the tipped wages system, if the tips received by employees do not meet the minimum wage, the employer must compensate for the difference.
The tipped wages system gained traction when U.S. President Donald Trump signed the so-called 'tax cut bill' in July, which included provisions to establish tax-exempt thresholds for tips and overtime pay. The tax exemption for tip income was also part of the promises made by Trump as well as by former Vice President Kamala Harris during the last presidential election. Earlier, in May, the U.S. Senate also passed a bill to exempt tip income up to $25,000 (about 34.86 million won) annually from tax.
Opinions are divided on the tax exemption policy for tip income. U.S. business publication Fortune reported, "Some claim that this policy could save workers thousands of dollars in federal income tax each year, while others raise concerns about who will actually benefit from it."
Chris Kempczinski, CEO of McDonald's, stated in an interview with CNBC the previous day that while he supports the tax exemption for tip income, McDonald's employees do not receive tips, and therefore the company does not benefit from this provision.
McDonald's raised its minimum wage by 10% in 2021 to expand its workforce during the COVID-19 pandemic. Currently, it is reported that new employees at McDonald's earn a minimum wage of $11 to $17 per hour, while managers earn between $15 and $20.
Kempczinski said, "There is an uneven playing field right now," adding that "restaurants that allow tips or incorporate tips as part of wages effectively make customers pay for labor, and the absence of taxes on tips gives them an additional advantage."