Restaurants must now, more than ever before, offer competitive compensation packages to employees, especially when it comes to tipping.
The history of tipping is a brief one.
Tipping was codified by the United States in 1865, at the end of the Civil War. Employers began hiring Black workers to work as porters and waiters-without pay except for the tips of customers.
In 1938, the Fair Labor Standards Act required employers to pay an employer a base wage which, together with tips, equaled the minimum wage. The FLSA still allows restaurants to use a “tip credit“- the tip amount can offset the minimum hourly wages as long as it equals the state-mandated minimum wage.
Washington, D.C., and 43 out of 50 states still use this system. It effectively lowers the hourly minimum wage to $2.13 and reduces a restaurant’s financial responsibility towards its employees. Although tipping has a troubling past, it is so ingrained in the restaurant business that many workers rely on it.
How tipping became a common practice during the pandemic
To survive the crippling effects of pandemic closures, many restaurants switched to only takeout establishments – at least for a while. This meant the in-house staff was earning less than they used to. As a result, customers began tipping their wait staff on takeout.
Many people have reported tipping more than usual when they pick up or accept deliveries. This Eater poll from Detroit in October 2020 showed that 70 percent of diners said they were listing higher than before the pandemic. That’s an increase of 10 percent from a similar Eater survey Eater conducted back in spring 2020 when 60 cents stated they were tipping higher.
This was the beginning of takeout tipping. It made people happy – restaurant staff were recognized for their service by customers, and consumers could express their appreciation and support for front-line services through takeout tips.
In a world post-pandemic, tipping has changed once more.
Tipping practices post-pandemic
Many consumers are facing shrinking budgets and less money in their pockets due to rising prices and inflation. This means tipping exhaustion among customers and possible income loss for restaurant staff, especially those who work takeout.
Some even suggest that Americans have become worse tippers since the pandemic. One survey found that while a 20% gratuity on a seated meal remains the standard, the number of people tipping for in-house meals has declined. From 77% to 73% by 2022. The delivery service has also been affected. BentoBox reports that only nine out of ten deliveries received a tip. How can restaurateurs keep their staff motivated in a highly competitive labor market and ensure that employees receive a fair wage despite the shrinking information? Re-evaluate old compensation policies, especially tipping ones, to ensure they are still relevant for today’s employees.
Restaurants can update their tipping policies in 5 ways to retain staff.
Review policies that affect them, especially those that are based on tips.
These five tips can help those who rely on tips.
Tip 1: Increase the base rate or eliminate tips
Since Clover merchant Renee Trafton founded Beak Restaurant in Alaska, she has insisted on gratuity-free service. Her menu prices are based on her and her team’s excellent service. This allows her to pay a living salary. In Alaska, where the business slows in winter, she found it essential to provide a regular paycheck for her employees. She’s happy with the high-quality workers she has been able to recruit.
It may be necessary to raise prices to increase the base wage of employees. This plan can be implemented using our post How To Raise Prices Successfully.
Clover offers a POS system that allows you to create custom fees, such as a fee for the living wage or $1 for online orders.
Tip 2: Get your employees’ input
Many servers and bartenders prefer tipping because they earn more than they would with a guaranteed-salary system. Invite your staff to provide feedback and experiences before changing your tipping policy. This will help you make informed decisions. Include your employees in the process of creating policies. They can provide great ideas on how to cope with the loss of tips.
You can also change the way you distribute your tips.
Due to new policies and capacities in restaurants, the employees’ share of tips may be smaller.
If tip pooling is allowed in your state, servers, bartenders, and delivery staff may prefer to share their tips. This can distribute dividends more equally across shifts and even between different roles in the establishment.
Waitstaff, who often deals with guest complaints and requests, may be reluctant to give tips. Some restaurants pay their staff based on a percentage of the shift sales instead of tipping. This method also provides an incentive to the entire team to sell more.
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