You Might Be Surprised Who Collects on the Tips You Leave at Restaurants

[xchrom]

http://www.alternet.org/labor/you-might-be-surprised-who-collects-tips-you-leave-restaurants



I was asked during a recent interview what happens to the tips we leave in restaurants. Do they actually go to the workers? I said they’re supposed to. Often they don't.

First, tips don't only go to servers. They are typically shared—with bussers, runners, bartenders, floor captains, and more. These workers receive varying percentages of total tips on top of the abysmally low minimum hourly wage they receive for tipped labor—$2.13 at the federal level, and between $2 and $4 in most states. These workers live off low wages earned from their employers as well as the generosity given by their customers, who decide whether and how much to tip.

By law, restaurants are required to make up the difference between a server's hourly base pay and the federal minimum for all other workers, $7.25. That means restaurants are supposed to calculate how much servers make in tips and ensure that those tips exceed $7.25 per hour on average. This legally required business expense is offset by what's called a "tip credit"—a discount on workers' wages because we, the customers, are asked to pay workers' wages for restaurants.

Having to calculate whether tips actually bring workers' wages up to the federal minimum wage each week can put an incredible burden on small businesses. Unsurprisingly, the U.S. Department of Labor reports a violation rate of 84 percent with regard to the tip credit.

Worse, these workers' paltry earnings are often stolen.

[Skidmore]

1. So alleviate that burden by

paying a fair living wage to all employees. If you cannot sustain a staff, then you probably shouldn't be in business to begin with.

[el_bryanto]

3. Most Restaurants run razor thin profit margins already though, from my understanding. nt

[hobbit709]

6. Friend of mine works at a local chain burger joint.

The most they will pay any employee is $9.25/hr. When he got his raise they cut his hours by 6 hrs/wk so he took home LESS.
Meanwhile the main manager gets $120K+ bonuses a year and the other 3 managers get $80K+. Their bonuses are determined by how much they keep wages down. The owner clears about $300K a year from that one restaurant alone and she owns 4 of them. Doesn't look too razor thin to me, but what do I know.

[dionysus]

11. it's true for small mom and pop type diners, probably not so much for larger or chain restaurants.

we had a diner in the lobby at work and the two owners busted their asses. they were there at 6 in the morning, and even though they closed at 3, didn't leave until 5 or 6 at night because that's when they did cleanup and took deliveries and did their paperwork,ect. real nice guys.

they had a brisk business but got out after 4 years because they had families at least one of them was there 7 days a week usually. it was killing them.

it's a tough business. in the 12 years I worked in that building, the place was under different ownership 6 times, and these were the only guys that didn't go under. place went downhill when they sold it, sad.

[Douglas Carpenter]

20. you are quite right.. 61% of independent and 57% of franchise restaurants will fail within 3 years

http://www.econ.ucsb.edu/~tedb/Courses/Ec1F07/restaurantsfail.pdf

It is a very difficult and competitive business to succeed in

[dionysus]

24. and even if successful, can burn you out.

[Douglas Carpenter]

25. I have two different friends in the restaurant business now - they are doing okay business whys

but I don't think they are getting any rest at all nor are their families. And both of them have only been at it a few months. They still have some adrenalin pumping since they are new in the trade. But how long can that last? Having a restaurant is a very common dream. As Niles answered when asked by Frazier if he had ever dreamed of owning his own Michelin three-star restaurant, "What young boy hasn't?" But the truth of the matter is - whether or not it is a Michelin three-star establishment or a truck stop and diner - it is hard, aggressive and highly competitive dirty work.

[LuvNewcastle]

28. You're right, it's very hard work.

I was in the food/beverage business for 20 years, and there's no way I'd go back to it. I really got tired of working my ass off. I really made good tips at some of my jobs and made a good living, but did I ever work for it. And dealing with people and their food and drinks can be a real pain in the ass. Some people are so picky and so demanding and often, too cheap. The generous ones usually make up for the cheap ones, but there are days.... It's good experience, though. You learn a lot about how to deal with people and the value of a dollar. Sooner or later though, everybody burns out, and sooner or later, for good -- just like I did.

[taught_me_patience]

30. You have no idea what the investment the owner made

If the owner invested $2,000,000, then $300k isn't a great return.

[hobbit709]

33. Chain was started over 40 years ago.

Daughter inherited it after her parents died. All 4 locations have long been paid off.

[Orrex]

18. Years ago, the owner of a small restaurant that I managed...

indicated that he was legally allowed to claim some surprising figure (something like 30%) as waste and/or lost food inventory. That means he could pocket $30 of every $100 he sold and still claim it as a loss.

He was quite gifted at creative bookkeeping, so for all I know he might have simply pulled that figure out of thin air, but if it's true then the razor-thin margin might be less razor-thin than is commonly thought.

[Xithras]

32. There is zero excuse for restaurants to not pay at least minimum wage.

Take a drive through California. We're inundated with every sort of restaurant, diner, food truck, chain joint, and greasy spoon you can imagine. Every one of them is as financially stable as their out of state competitors, and every one of them pays each of their employees between $8.00 and $10.75 an hour (depending on location) BEFORE a dime of tips is added to their income. And the state just approved another increase to up that bottom number to $10. If it hasn't killed these businesses in California, there's absolutely no reason to believe that it will somehow be MORE damaging in other states.

It's kinda like gas. There was a short lived proposal here in California to require all gas stations to have a serviceperson on staff and available to clean windshields, air up tires, and pump gas...if the driver wanted. It died within days under a chorus of gas station owners complaining that the proposal would put them out of business.

Ironically, just over the border in Oregon, gas stations not only REQUIRE that gasoline be pumped by a service attendant, but they usually manage to do it while charging LESS per gallon than their "self service only" competitors in California.

Business owners fear change, and are afraid that every regulation will kill them. They're usually wrong. Still, their fear has killed a lot of good laws.

[markpkessinger]

36. So how is it that in Europe, they manage to pay servers a living wage? n/t

[Laelth]

2. k&r for labor. n/t

-Laelth

[NightWatcher]

4. Of course others get tipped out

Busboys and runners don't get the opportunity to get tipped but they provide a service.

This might be news to anyone who has never worked in the biz

[Nine]

9. I don't think most of us object to that.

Not sure why they even included it in the article. It's this that I object to:

One in five servers reports being forced to share tips with management, according to a national survey conducted by my organization. You might think that happens only with cash, not with credit cards. Think again. Restaurants often deduct credit card-processing fees from workers’ tips.

Philadelphia recently passed an ordinance banning the deduction of credit card-processing fees from tips. When the bill was being debated, a local restauranteur complained that he'd lose $500,000 annually. It was a rare case of unintended honesty. He had been skimming half a million dollars from his workers' tips. Sadly, Philadelphia is just one of a few places to ban tip-skimming.

and this:

Workers’ tips are stolen in other ways. One of our leaders, Claudia Munoz, tells the story of having worked at the IHOP in Houston while in graduate school. Her hourly base pay $2.13. The IHOP did not bother making sure that her tips brought her hourly wages up to the federal minimum. It reported that she was earning $7.25 an hour regardless of what she earned in tips. The result? No paycheck. Ever. The real $2.13 an hour paid the taxes on the fictional $7.25 an hour.

Claudia describes not being able to afford food, and being so hungry that she’d wait to get to the restaurant so she could flirt with cooks to get extra food. One evening, Claudia worked an overnight shift at the IHOP, and earned some decent tips. But at the end of the night, a couple walked out without paying the bill. The restaurant's management—though it is illegal—required Claudia to pay for the walkout, which was more than everything she earned that night.

Claudia paid $20 to work for nothing.

[taught_me_patience]

19. How can you not deduct credit card processing fees?

If a customer tips $10 on a credit card, but management receives $9.80 after fees, do you think the waiter should be paid the entire $10?

[Nine]

23. The way I read it...

...the restaurants were making the entire fee come out of the tip portion rather than the restaurant's portion, not a proportional amount. Perhaps I misunderstood?

Even if it's only a proportional amount, that's still kind of sleazy in my opinion. That's the restaurant's cost, not the employees'.

[wercal]

26. Seems you've been in the business...Question:

I go to a place quite often. Sometimes I pay with debit card, and tip on the card. I assume my tip is credited to the individual server...is that correct? And I assume that at the end of the shift, the server counts up the tips, and gives a percentage to the busboys...is that correct?

In other words, I assume my server gets rewarded for good service, and the tips aren't split across the board, equally among all the servers....and I hope that is the case.

But then sometimes I leave a cash tip. And as I walk out of the restaurant, I see the busboy clear my table, tip and all. What does the busboy do with this money...does he throw it in a large pot of money, or is it counted and credited to my server again?

Adding to the confusion, often server A might take our order and give us our drinks...then server B delivers the food...and then server A is back checking on us from time to time. Is all of the tip from the table credited to server A, or is this indicative of system where the tips are in fact pooled together?

[LuvNewcastle]

29. If you see the busboy taking the tip off the table, go back and stop him.

He's not supposed to do that, and he can get fired for doing that. From now on, if you leave a cash tip, hand it to your server instead of leaving it on the table. Most busboys are honest, but there are some that will steal a server blind. When I waited tables, if the customer paid cash, I would go directly to that table when the customer got up to leave.

A lot of people get confused about which server to tip. Servers are supposed to help each other out, so it's common for another server to bring out your food because your server might be busy taking someone else's order when your food comes up in the window, and nobody wants your food to wait too long in the window or it will get cold.

Your server is the one who brings your check. Don't be concerned with which server gets the tip when you pay the check. Tip according to how good the overall service was; don't be overly concerned with who did what for you. If you didn't have to wait long for anything and your food was good and was served in a timely manner, that's all that matters. If you pay cash and you happen to give the tip to the 'wrong' server, they'll either tell you so or they'll take it and give it to the server themselves. It is very rare for one server to steal from another who is supposed to get the tip. There's an unwritten code that that is just not done.

[ieoeja]

34. When I bussed we were forbidden to take tips. Even if the tipper told us it was for us.

Short of having the tipper sign a notarized statement, nobody witnessing the transaction can tell if the tipper is giving me money to pass on to the server or not. Sans notarized statement, signed in triplicate, and filed with the county clerk, the assumption is that the money was for the server.

Official exception: the regular big spender who sits at the bar and likes to spread the wealth.

Unofficial exception: the African-American family the server avoided all night because "Black people don't tip." With their server avoiding the table, they had to keep flagging me down to pass along their drink orders. Before the night was done, I was taking orders/drinks directly to/from the bartendars. All the server had to do was ring it up. At the end of the evening the server said, "sure enough, they gave me a lousy tip."

"That's funny," I said as I pulled a $50 bill out of my pocket, "they gave me $50."

She raised holy hell as I had, of course, just violated rule #1. She stormed off to management with me following along with a cat-that-ate-the-canary-grin on my face. Don't know what the hell she was thinking. They didn't fire her. But they did let her know what they thought about the incident.

And told me to keep the money.

[KamaAina]

35. You know who really doesn't tip?

Repukes. I learned this from a NOLA cabbie when I arrived there shortly after the 1988 RNC. He said it was the worst week he'd ever had.

edit: Servers would therefore be wise to avoid tables full of obvious repukes.

[wercal]

40. Wow, I've seen the busboy take the tip many times.

At this restaurant, you take your check to a register, and pay your bill there...so its difficult to hand the tip to the server. I've always left it on the table.

I could use my debit card....I'm fairly sure the tip goes to the right server in that situation, but sometimes they appreciate cash.

[markpkessinger]

37. The practice varies . . .

. . . In some establishments, things work as you assume, where servers get their individual tips and then tip bus boys a percentage of those tips. But in some places, things operate on a pooled tips basis.

[seveneyes]

5. Maybe it's better to always tip with cash

Give the one earning the tip a chance to keep their fair share.

[pipoman]

8. "the one earning the tip"

Is the person who quickly clears the server's table to keep the table occupied by tippers not included as having earned the tip? If the server has to clear their own tables it takes longer. Most servers don't mind sharing with those who help them turn their tables faster and support them.

[seveneyes]

10. Restaurants have taken advantage of their workers and their customers it appears

It's been more than 30 years since I worked in a restaurant, so I have no idea how they divide the generosity of customers now. Back then, only waitpersons retained the tips. The buspeople cleaned the tables and crumb trays and the waitfolk took it from there. Certainly not a 50/50 split of work. I wonder how they calculate effort now if bussers are getting tips too?

Anyway, workers should be paid a living wage and leave the tips for efforts above and beyond the call of duty. Just price the standard service accordingly and be done with it.

[ScreamingMeemie]

17. Thirty years ago, I worked for Ram's Horn.

At the end of the night, we counted our tips and took out 20 percent for bussers and host/hostesses.

[grahamhgreen]

13. I try too!

[pipoman]

7. A new IRS rule effective 1-1-14

will ultimately hurt wait staff income. Previously many restaurants could and did impose a gratuity on customer tickets, usually for groups. Beginning Jan 1st, if I charge a standard gratuity at my restaurant for my servers I have to report the gratuity as income for the server. Previously these gratuities were self reported by the server. Most servers under report tips as a way of avoiding taxes, and most restaurants don't police the tip reporting as long as enough tips are reported to keep the restaurant from having to make up the minimum wage difference. This completely skews the stats of what servers actually make which is necessarily significantly higher than the IRS server income stats would show. It is true that server tips are shared with other ancillary employees in a restaurant. In the case of my restaurant, the tips are shared with the hostess/floor manager. The reason is that servers usually average $15 to $20 per hour while the floor manager is usually at $10 to $14, this is the person who pays out credit card tips and tips left at the register. There have been many times servers hourly rate with tips have exceeded my rate as restaurant general manager. If it happens once in a while to floor managers it is ok, if the servers make more than the floor manager every day, it creates tension.

[FarCenter]

12. What happens if a cash tip is left on the table.

[BainsBane]

15. Yeah, I like to tip in cash whenever possible.

[Myrina]

22. I always tip in cash.

Food, bars, hairstylist etc. Leave it up to them if they want to report it or not - it's not my call.

[pipoman]

42. The servers all know the program,

they make good tips, and a great hourly wage, in cash, daily...they know it is a fair arrangement. They know their job is made easier and their tips are better because of the effort of others. They know they have a hard job and so do others. They don't begrudge the floor manager a 1/2 share of their shared tips. With out this it is impossible to keep good floor managers because they can make 1/2 again more money by waiting tables. To answer the question, they submit them. Never had anyone accused by other servers of holding out.

[Gormy Cuss]

16. So the actual gratuity will be reported to the IRS? Bummer.

[Travis_0004]

27. I dont see a problem with that ruling.

If they make money they should report it and pay taxes on it.

Isnt that a good thing if it cuts down on tax fraud.

[pipoman]

43. It isn't

groups are notoriously bad tippers. If they aren't at least prompted for a reasonably good tip, they are likely to leave 5% and all rave about the service. So that is what we will do in 2014. I am having a stamp made for tickets of groups suggesting a 15% tip and figuring that amount for them.

[BainsBane]

14. That is why you need to leave 20% or more

The waitress has to tip the bus boys and other staff.

[Myrina]

21. Makes sense, actually ...

.... my first job in high school was as a busser .... and my servers regularly broke me off a few bucks at the end of our shifts ... if not for me, the tables wouldn't be cleaned & set, the appetizer/salad dishes not taken away, water not refilled etc ... I think it's only fair.

[Nine]

31. I would love it if this country did away with tipping altogether.

Just charge more for the food and pay the employees fair wages.

[Douglas Carpenter]

38. that is pretty much what they do in Australia - so I'm told. In most of continental Europe - a 15%

or more gratuity is calculated into the price of every item - and distributed to the various service staff according to some formula. In Germany or Austria and many European countries - a four year apprenticeship is required to become a full waiter. It is regarded as a serious profession.

[xchrom]

41. that's a nice reaction.