Tipping in Restaurants: Here to Stay or Go?

 

Background

 In August, national restaurant chain, Joe’s Crab Shack, which operates more than 130 locations nationwide, rolled out a no-tipping policy at 18 of their restaurants.  To compensate for the elimination of tips for employees, the restaurant is raising wages to $12-14 per hour.  Joe’s Crab Shack is the first national restaurant to test a no-tipping policy. 

 Issues with Tipping

Tipping in restaurants has been engrained in American culture for years.  In 1897, there was a movement against tipping in America.  Tipping at most restaurants is socially mandatory because tips are regarded as part of servers and restaurant employee’s salary.  The federal tipped minimum wage is $2.13 per hour, although there are a number of states that require employers to pay the full state minimum wage, or to be tipped above the federal minimum wage.

Tipping is a hot spot for discrimination.  Patrons will fairly or unfairly tip, or refuse to tip based on the server’s gender, sexual orientation, or race, which is not fair to the employees who depend on tips in order to make a living.  In this sense, the wage is “customer-dependent,” as opposed to the employees being fairly rewarded by management based on experience and regular evaluations. 

In August, a Rutgers student who waits tables at a restaurant received a no tip on a bill that was $112.03 because the food took too long to arrive, even though the waiter noted to them that it was busier than usual.  In New Jersey, minimum wage for servers is $2.50, which places the necessity on tips for servers.  It’s fairly common to open the internet and find a viral story about someone receiving a poor tip.  In the end, “tipping boils down to guilt,” says Michael Lynn, who is a professor at Cornell.

Examples

In New York City, the Union Square Hospitality Group, which operates 13 restaurants in the city, has eliminated tipping from all of the restaurants.  CEO Danny Meyer says it will allow their employees a better opportunity for advancement.

In Washington, D.C., Bill Perry, owner of the Public Option, opted to eliminate tipping and start servers at $15 per hour, which is 5 times the tipped minimum wage.  To make up for the wages, Perry will price his food and beverages about 15 to 20 percent higher.

In France, and other European countries do not expect the patron to tip.  Instead, the employees are paid a “living wage,” and a tip is not expected, although it is fairly common to leave a small amount of euros as a tip.

Will more national restaurants follow suit with Joe’s Crab Shack?  Or will the no-tipping policy be exclusive to smaller restaurants like the Public Option?  Only time will tell.

Benefits of No-Tipping

·         Employees would be making the same starting wage as their co-workers.

·         In 2014, the turnover rate was 66.3%, which was up 10% (according to the National Restaurant Association).   By providing a steady wage and potential for growth, the employee may be more inclined to stay at the restaurant, as opposed to going to a different place after they get experience.

·         Eliminating tipping could allow for simpler book-keeping for the owners.

 Benefits of Tipping

 ·         Employers can pay a low wage to minimize costs.

·         Motivates employees to be friendlier and work harder.

·         Keeps the cost of items lower for customers.