The pandemic has offered restaurants a much-needed reset button. For years progressive restaurateurs, especially those in fine dining, have been looking for a way to make the industry into a “real” profession, while also finding a way to even out the inequities in pay between the servers in the front of the house and the cooks and dishwashers in the back.
As sit-down restaurants reopen dining rooms at reduced capacities, many operators are looking at eliminating tipping and going to a flat administrative service charge, which compensates both front- and back-of-the-house employees.
“Before Covid-19 (eliminating tipping) was not an easy path, now the opportunity is there,” said Tracy Singleton, owner of Birchwood Café, a farm-to-table restaurant in Minneapolis. Restaurateurs have been reluctant, Singleton said, because of the “loud server voice talking about taking away their livelihood.” Now that’s not an issue, everyone’s livelihood is endangered. Singleton said her staff was more than willing to give up tips in the spirit of fairness, and it has created both a stronger team and also freed up servers from having to depend on the whim of diners for their income.
The path wasn’t as rosy for Timothy McKenna, director of operations for Mill Valley Kitchen and Benedicts in the Twin Cities area, when he switched to a zero-tipping “European model.” “It’s been difficult,” he said. “I lost a lot of good people.”
McKenna did the math and servers could still make the same amount of money on a straight salary, but the catch was they had to work fulltime to earn it. One of the attractions of being a server, especially in restaurants with high check averages, is that you can make good money working part time. Serving has long been a way for actors, musicians and parents to pick up extra cash working just a few lucrative shifts a week.
The change also would mean servers working the less lucrative shifts, such as weeknights and lunches, can make the same amount of money without working every weekend. And cooks will see a bump in their pay.
Another hesitation has been that diners are used to tipping and like the ability to reward good service. Adding a 10 to 20 percent service charge to the bill requires posting it on your menu, the bill, your website and also explaining to guests why it’s on the bill and how it’s distributed to staff. Servers need to be onboard, because they will be the ones reassuring the guests they are earning a living wage, and cannot accept a gratuity.
That means more work for management, said Randy Stanley, owner of two “high-touch, high-price” restaurants in Minnesota, because they have to “motivate outside the tip.” But it also eliminates “employees paying employees,” where servers decide whether to tip out the back of the house and how much.
In states that have a tip-credit, servers may actually benefit because they will have a guaranteed percentage of a mandatory service charge, depending on what the restaurant decides it can charge. The range of fees is 10 percent to 20 percent. And owners say that the service charge also allows them to fund health care for employees.
While some critics of the flat rate advocate raising menu prices, many restaurateurs don’t believe the public is going to pay more for the same hamburger—plus food prices are going up, as well as all the added expenses of PPE for employees, all while operating at half capacity.
Stanley, however, is planning on raising his prices by 10 percent by the end of the year, and “I have to find ways to justify those higher prices.” And one way is to make foodservice a career, where everyone is responsible for keeping the customer happy.
While proponents talk about parity, Len Ghilani, a consulting partner with Results Thru Strategy who is currently based in the Phoenix-area, calls it a “socialistic approach that doesn’t incentivize people to be better.” It might work, he concedes, if everyone was doing it, via some type of federal mandate, but outstanding servers will most likely go where they can be tipped and have some control over what they’re making.
There are other downsides as well: Owners lose their tax credit for the FICA paid on tips and there is more bookkeeping on paying tiered salaries and implementing raises in a timely manner. And then there’s always the chance of a lawsuit from former employees, Stanley added.
“I have some reservation about this because the historical expectation is that you will get tips,” said attorney Jason Raether of Pruvent PLLC in Minneapolis. “The laws on this are not clear. It’s a change in an industry, and like in most cases the change will happen and then the laws follow.”
Before attempting this major switch, set up guidelines, Raether said. Employees need to be presented a written policy, and personal conversations scheduled about why the policy was decided on and what they’ll be earning. It won’t surprise anyone returning to work that job conditions have changed, he said. And while server salaries may be lower, the employees in the back of the house will be seeing more in their paychecks. One thing that can derail the process is if some servers accept tips and others follow the rules. Which is why management must make it clear that servers are not allowed to ask for or accept tips, he said. Provide servers with a script of what to say if a customer wants to tip.
And while paying a living wage will move restaurants closer to the model other professions operate under, Ghilani’s words ring true: It will be easier to implement if everyone was doing it.