What happens when restaurants tip free?

(NEXSTAR) – It’s widely understood that those who work in the food service industry are typically paid lower wages than the rest of us, in large part because they receive tips. However, as many have argued, paying servers a federal minimum wage for tipped workers, paired with the tips they receive, sometimes not enough to reach the minimum wage standard of $7.25. This has encouraged some restaurants to transition to a tipless business style.

now federal regulations require tipped employees – people who receive more than $30 in tips each month – to be paid a minimum wage of $2.13. Those servers must average $5.12 in tips each hour, meaning they will make the federal minimum wage of $7.25. If a server doesn’t earn enough tips in a shift to make $7.25 an hour, federal law says the employer must pay the rest to reach that.

While this may vary for some states, others follow the federal minimum requirements, including Indiana, where one business owner decided to stop accepting tips.

Last year, Kurtis Cummings, founder and president of Switchyard Brewing Company, decided eliminate tipping in his Bloomington, Indiana, craft brewery. Instead, switch current employees are paid at least $15 an hour.

“It’s the employer’s responsibility to pay the employee, not the customer,” Cummings explained to Nexstar. He also notes how factors such as a server’s gender or age, the weather, or the day of the week can affect how much — or how little — servers tip.

Research has even found the majority of people don’t base the tips they leave on the quality of the service, they actually do follow social norms. And when it comes to quality of service, Cummings says that any issues you may have shouldn’t take away from the server’s earnings.

“It’s still more likely the company’s fault because it’s the company’s job to train, right?” he explained. Plus, the promise of a tip doesn’t always guarantee good service. What? Like any other job, it’s job security, according to Cummings.

Cummings said Switchyard’s switch to tip-free “has been a real attraction of the job.” Staff no longer have to worry about missing a weekend shift – shifts that are usually busy, meaning more tips opportunities – and the company can provide other benefits like paid time off.

While Cummings employees and most of their customers have considered the idea of ​​no longer tipping, not everyone agrees.

Cummings explained that after Switchyard switched to its new no-tipping policy, some people — many from outside of Indiana — began leaving one-star Google reviews for the business. This is a relatively common trend, Mike Lynn, professor of consumer behavior and marketing at Cornell University, told Nexstar’s KTLA.

Whether a restaurant adds a service charge or slightly raises menu prices, like Switchyard, Lynn said the business will likely see its online rating dip.

“It turns out that when customers evaluate expensive restaurants, they’re pretty much looking at the price of the menu, and that’s it,” said Lynn. “We’re dismissing, or somehow discounting, the fact that you’re expected to tip.”

Switchyard has been tip free for a year. Some, like Triptych Brewing in Savoy, Illinois, just joined the movement, while others, like Optimism Brewing (which inspired Cummings) in Seattle and Zazie in San Francisco been tip-free for years.


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