Tipping is optional, but opponents of this deeply embedded American practice say it shouldn’t be. Some of the country’s top restaurateurs are exploring new tipping and payment structures to make it fair for everyone, bridging the earnings gap between those in the kitchen and those in the dining room — but many customers are experiencing sticker shock at the resulting higher menu prices or confusion at the more complicated gratuity suggestions. With minimum wage increases going into effect in some of our most populated states, we’re reaching a tipping point.
More than a year after nationally celebrated restauranteur, Danny Meyer, began to roll out his “hospitality included” policy, we review today’s state of tipping with our friends at CBSN, including the two-line gratuity solution a number of restaurants on the West Coast are embracing in response to increased minimum wages and growing income disparity between the front-of-the-house and back-of-the-house staffs in restaurants.
How It Works Traditionally:
If you’ve never worked at a restaurant, you may not realize how different (some may say antiquated) the pay structure is compared to most other industries. Unless your restaurant servers are working at a high-end restaurant or are slammed with customers 24/7, there’s a chance they’re earning peanuts. But with tips, serving can be a well-compensated job compared to the non-tipped earnings of many line cooks and dishwashers behind your eatery’s closed doors.
Federal minimum wage is $7.25 per hour, unchanged since July 2009. For servers, that means their employers can pay them as little as $2.13 per hour if they earn at least $30 per month in tips, according to the U.S. Department of Labor. If wages and tips don’t add up to $7.25 per hour during any pay period, the employer is required to increase the wage on that paycheck to compensate.
Delaware, Maryland, Michigan, Pennsylvania, Rhode Island, Wisconsin, and West Virginia are a few states that pay less than $3.50 per hour to servers. Eighteen other states and provinces stick to the federal minimum wage of $2.13.
Some states, such as New York and California, have legislation that incrementally raises the state minimum wage to $15 an hour in the next several years. New York’s wage rose to $9.70 by the end of 2016. By 2022, California’s minimum wage will be $15. Once wage hikes became law in Washington, 30 percent of Seattle’s restaurants added a service fee to the tab, according to a University of Washington study. Mandatory service charges have been a practice for more than a decade as customers are accustomed to seeing an extra service fee on large parties.
A tip that’s 20 percent of the bill is customary these days, although a couple decades ago, 15 percent was typical. But customers can balk at adding even that amount to their bill at the end of the meal, resenting the responsibility of paying the server’s wages when he or she did an average or subpar job, or the food was incorrect or bad. They ask: “Shouldn’t the employer be paying the servers rather than me?”
And what about the cooks and dishwashers in the back? Their hourly income has increased about 30 percent in the last 30 years, while server wages jumped about 300 percent, restaurateur Danny Meyer said on a Sporkful podcast in which he called the tipping system one of America’s biggest hoaxes.
The origins of tipping have racial and servitude connections in the U.S., Meyer and other opponents say, and it’s a practice we shouldn’t still have. On top of that, even today there’s a much higher proportion of minorities working unseen in the back, where wages can be much lower.
Starting in the fall of 2015, Meyer, CEO of Union Square Hospitality Group’s 1,800 employees at 14 restaurants including high-end Union Square Café and The Modern, started implementing his new “hospitality included” program. He has gradually eradicated tipping since November 2015, increasing menu prices at “hospitality included” restaurants to compensate. It’s Meyer’s effort to equalize pay among his workers in the front and back of the house, paying all employees set wages based on experience and skill.
Amanda Cohen of Dirt Candy in New York City started the no-tipping practice even earlier than Meyer in 2015, because she couldn’t find cooks to work for her at the wages she was able to pay. She also argued that the current tipping system “is sexist, it’s racist, and it’s antiquated,” she said on Open Table.
Customers are used to their favorite entrees at $18 rather than $23, so when menu-price increases creep up as high as 30 percent, it’s hurt business. The Modern’s profits dropped in the first year of its no-tipping policy. Other big-name restaurateurs have tried switching over to the no-tipping model, but couldn’t swing it and had to return to the traditional method.
Joe’s Crab Shack was the first major restaurant chain to test the no-tipping structure at 18 of its more than 100 locations nationwide, but less than a year later, returned to the traditional gratuity structure at 14 locations, according to CNN Money. The chain’s research found that customers felt tipping provided incentive for good service, and they didn’t trust management to pass along the profit from the higher menu prices to the employees.
There’s yet another way to pay restaurant employees more fairly and sustainably: providing an opportunity on the bill for customers to tip their server and kitchen staff separately. That way, they can tip the server on the service only, and the kitchen staff on the food quality. But it can involve more math, politics, and analysis than customers want to do at the end of a nice meal.
Washington and California restaurants are handing out tabs with two gratuity lines. Back in 2014, Chef Zach Pollack’s Alimento in Los Angeles added a separate gratuity line for cooks and dishwashers on its receipts.
But that begs the question: What should the ratio be? Some restaurateurs recommend 15 to 17 percent for your server and 3 to 5 percent for the kitchen staff. But maybe it should be 50/50, with the employer’s set pay adjusted accordingly.
The struggle continues for equitable, livable wages for all restaurant employees, while maintaining a restaurant’s profit and customer satisfaction. What system do you prefer when you’re dining out?