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Mar 9, 2013 12:25 PM

Restaurants posting tip sharing policies

In Minnesota, over the past few months, several restaurants have started promoting the fact on the menu that "All gratuities are shared across our entire service team (waitstaff, bus staff, and cooks).)

A couple of questions

1) is this part of a national trend?

2) the service at these restaurants was well below norms for restaurants of similar quality. Admittedly a small sample size, but i wonder if this type of arrangement discourages waitstaff from extra hustle since they would receive less upside.

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  1. Don't think it's part of a national trend. I've never seen such a sign.

    In some states it would not even be legal to make waitstaff who are legally paid less than minimum wage have to share tips with cooks who must be paid full wages (same with management, anyone with an ownership <even if tending bar>).

    Does it discourage waitstaff from hustling?

    There are two schools of thought and a lot depends on whether the verbiage you quoted means there is a tip pool, OR if it means the server MUST tip out a percentage of tip received to busperson, line cook, bartender, etc.

    If the former, it kills individual incentive. If the latter, the more $$ a server gets as tips, the more $$ servers keeps after mandatory tipouts.

    Personally, as a patron, this is none of my business. The sign may be meant to encourage a patron to tip more knowing that others besides the server must share the money tipped, but to me it's a turn off.

    4 Replies
    1. re: bagelman01

      didn't starbucks get sued for directing some of the money in the tip jar to management?

      1. re: westsidegal

        In Massachusetts alone, Starbucks had to pony up 14 million because it had managers sharing in the pooled tips

      2. re: bagelman01

        <The sign may be meant to encourage a patron to tip more knowing that others besides the server must share the money tipped>

        I tip for service. If the service is stellar I'll tip between 20-25%. I have no idea where the tip goes after I've left it. I *certainly* would never leave more because the sign implemented was designed for me to tip higher to cover every other worker in the restaurant.
        If the server wants to tip the chef to make sure his/her order comes out quickly then that's the prerogative of the server. It'll have to come out of the tip I leave...

      3. Are the restaurants really phrasing it in terms of gratuities or are they using a service charge? Traditionally, restaurants have had much less leeway in terms of redistributing a voluntary tip or gratuity to the back of the house than they have had with a mandatory service charge. Here is a quote from the US Dept. of Labor:

        "The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers, and service bartenders. A valid tip pool may not include employees who do not customarily and regularly received tips, such as dishwashers, cooks, chefs, and janitors."

        As for national trends, it should be noted that in San Francisco, the two Michelin star restaurant Coi has had the following phrase on the menu for several years: "18% service charge (shared by the entire staff)" My understanding is that the motivation is to lessen the income disparity between the tipped and non-tipped employees. California's minimum wage law does not have a tip credit. The implication is that a junior kitchen employee who makes minimum wage or a little more often makes way less money that a cocktail waitress who is subject to the same minimum wage law but may make bundles in tip on top of her wage if she works at a successful establishment. (Currently, the minimum wage in San Francisco is $10.55 regardless of whether the employee receives any tips.) A mandatory service charge gives the restaurant the ability to provide a more equitable income distribution without increasing the cost of dining out. Presumably, if there is an 18 percent service charge, people will decrease their tips accordingly.

        I have no idea about what's going on in Minnesota, but it's a state that, like California, does not have a tip credit when it comes to minimum wage.

        1. Very common in the UK, where, increasingly, places levy a service charge instead of the old-fashioned tip.

          I'm all in favour of it and think it's a great idea which, in my view, leads to improved service levels across the restaurant as the staff work as a whole team, rather than as individuals. I do not want serving staff to "hustle" so, if it works to discourage that as well, then there's a double benefit for me.

          I think the OP should welcome it and encourage the restaurants to continue by drawign the managements attention to both the gopod points and the bad points where they are experienced.

          1. I believe the restaurants you may be referring to are the couple establishments where the chefs double as the waiter.

            It's a known policy in any professional establishment that waiters tip their bartender and bus staff at the end of their shift.

            Unless you work for a large establishment (typically hotels),as a waiter you arent claiming your tips as income and a taxpayer such as myself is contributing to your tax refund at the end of the year because you arent paying any payroll taxes.

            4 Replies
            1. re: shikken

              I have a BIG problem with your final paragraph....
              "Unless you work for a large establishment (typically hotels),as a waiter you arent claiming your tips as income"

              You better be claiming tip income or expect the wrath of the IRS to come down on you. Restaurant owners are expected to show employees receiving tip income of no less than 8% of sales. On a bad snowy night it's possible to be taxed on tips not earned.
              Tip income is not subject to social security taxes, BUT it is subject to Medicare taxes. I recently did taxes for a family member whose paychecks and w-2s show this reported tip income.

              Don't believe that anyone who files an income tax return and lists occupation as server/waiter, etc and had a W-2 from a restaurant can get away without declaring tip income, those days are gone.

              This is not to say some don't lie, cheat and underdeclare the tip income.

              1. re: bagelman01

                "Restaurant owners are expected to show employees receiving tip income of no less than 8% of sales."

                Just curious but how on earth are the owners expected to do this in an old-fashioned traditional tipping environment - where the tip passes from customer direct to server.

                I understand how it's easily done with a service charge system, such as we often have in Europe, but not in a cash system.

                1. re: Harters

                  It is "assumed" income. It gets reported by the employer whether there were tips received or not.

                  1. re: Harters

                    There are different systems in place ranging to filling out a paper form to balancing out the servers orders on the computer. Sales are tallied, tips are entered. This is done per shift.

                    At the restaurants I have worked, particularly in the last 20 years, the majority of bills and tips are paid by credit card. That makes it difficult to under report.

                    Under reporting can come back to bite you when applying for a mortgage, etc. There may be some who do it, but IMO it just doesn't happen to the degree it once did. There are also enough eyes among the rest of the staff that would make it difficult for someone to do this with any frequency. Lastly, if a server is receiving consistently lower tips the management will assume their customers are not happy...

              2. This policy is called 'shared tips' and I don't like it as it takes away from good servers to those who are slackers.