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To Add A Tipping Policy Or Not, That Is The Question

To Add A Tipping Policy Or Not, That Is The Question

Two Rhode Island restaurants have made the move to add a “no tipping policy,” effective immediately. We knew this was coming when Danny Meyer shifted his restaurants to “hospitality included” at the back half of last year. We knew this was a big deal because we are moving full steam ahead, as a country, on the minimum wage debate.

So why are some of us so surprised, and even confused, by this new policy?

To Charge Or Not To Charge For Service

That is the question.

At Rosmarin and Vinya, the last two weeks have been a shift for their staff. Now, "Restaurant workers will make around 12-15 dollars an hour without tips, compared to the state minimum of $3.39 with tips”.

According to Eater, currently, only 7 states require employers to pay servers the full state mandated minimum wage. On average, employees with tipped wages make $2.13/hour. For wait staff and bartenders at these Rhode Island restaurants, this “no tipping” move means a raise from the state tipped wage of $3.39.

Behind the scenes, however, another shift is happening that guests will see. Turns out that in eliminating tipping and raising wages, these two Rhode Island restaurants are adding what they refer to as a “service charge” of 22% to make up the difference.

This is leading to two different conversations among guests...

  1. "22% is what I would have tipped anyway - no big deal, it’s less work for me now to figure out what amount to tip."
  2. "Why should I have to pay a service fee?"

.... and two different conversations among servers

  1. "No tipping policies will increase the morale of FOH and BOH staff."
  2. "No tipping policies may lead to a less than exceptional guest experience."

Why Wages Are So Low, Anyway?

Servers make roughly $10 per hour when operating with tipping. In some states, the minimum wage is higher than this for all workers. This begs the question, why are servers paid as such anyway?

And to answer that question, a history lesson...

In America, tipping actually originated as a way to drive up profits during Prohibition, when law-abiding restaurants (read: not speakeasies) lost one of their highest profit margins - booze.

Prior to that, tipping was actually frowned upon.

"In the American democracy to be servile is incompatible with citizenship. Every tip given in the United States is a blow at our experiment in democracy. The custom announces to the world...that we do not believe practically that "all men are created equal.”
- William Scott

So what changed our attitudes and why do wages remain the way they are? The Temperance Movement.

Less profit from alcohol sales meant lower sales per cover and restauranteurs had to make up for it by encouraging tipping, not higher wages.

Okay okay, so that was a LONG time ago. Here’s what’s happened since that time period (besides the fact that we can all openly love beer again).

  • During Prohibition, 6 states made tipping illegal. By 1926, that was repealed.
  • In 1966, the federal minimum wage was adjusted to allow tipped workers to be paid half that of the federal minimum wage.
  • In 1991, tipped wages and the minimum wage were broken up and the wage was set at $2.13 an hour.

Why The Change Now?

In recent months, there has been a lot of heated debate over the minimum wage in America. During that time, tipping has been at the forefront of the conversation. Some big names in the industry have moved forward with changes in response, others are in a “wait and see” mentality.

Nonetheless, the decision to tip or not to tip and whether or not to provide a salary to restaurant workers remains in the hands of the restauranteur.

What should your restaurant do? It’s different for each restauranteur and for every style of restaurant and service. Its not a topic that is going away anytime soon - but it’s your call.

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