McDonald’s Corporation (NYSE:MCD) announced last Wednesday that it would go about raising funds equivalent to wages for 90,000 employees working at myriad of company-operated stores. The company expects to pay all these workers, wages in excess of the locally considered minimum wages by at least a dollar, by July 1, 2015. MCD has robust plans and its top management has strong resolve that the company would pay any average employee working at the stores at average pay rates more than $10 for each hour, till December, 2016-end.
McDonald’s Robust Plans
MCD will also allow employees catering to part time and full time services for at least a year or more, accrue paid time-offs, July 1 2015 onwards. However robust and envisioned the plans and ideas may seem, the only question that arises and lingers on is what will be the approximate costs incurred to this company?
Analysis Of Cost Incurred To Company
On an assumption that the minimum wage of any corporate-operated store worker is $7.25 for an hour, the estimate average wage is expected to shoot up to $10.25 per hour, soon after 2016 ends. Thus, the difference of $3 per hour would estimate to a humongous figure of $560 million till the end of the next fiscal. Further, a dollar increase per hour translates into $187 million approximately!
McDonald’s net annual dividend payable to each of its 961 million shareholder is $3.40; this translates to $3.27 billion approximately. Now, a dollar increase to each of its 90,000 workers is equivalent to $0.20 for every share.
The 2014 Example
In the last fiscal, McDonald’s Corporation (NYSE:MCD) garnered a net income of $4.76 billion. A dollar rise per employee would result in rise in the company’s income by another 3.9%. Another attribute of concern is that the net income fell during 2013-14 by some $0.86 per share or evaluating to $828 million. However, it must be comprehended that 13,000 stores in the US that are operated solely by franchisees, would not benefit from this pay hike.
Now, the crux of matter is MCD is fighting a NLRB ruling and if that materializes, 675,000 of its employees would get a similar rise in packages. A dollar increase thereby would cost the company $1.4 billion. It is perceivable that even if franchisees and MCD share it to half-a-dollar each, it would in fact be a severe blow to esteemed MCD’s bottom line.