Tips in Restaurants
The Wall St. Journal (3/1/15) reports that restaurant spending increased by 11.3% over the past year and that “food-service employment has surged.” The income of restaurant workers has not equaled the uptick in meals served; though employers are starting to pay more—3.1% more over the past year says the Department of Labor. Owners and managers want to adequately serve customer volume, and also want to lower their costly turnover rate (as high as 80% a year in some restaurants).
The restaurant business makes a distinction between front of the house workers (primarily the table servers and often bartenders) and back of the house workers (cooks, dishwashers, some hostesses and others). Technically, diners are not allowed to tip back of the house, though waiters and waitresses usually share a portion of the tip with others. Many diners think of the tip as a token of gratitude to their server. But that common notion is not correct. A 1966 amendment to the Fair Labor Standards Act introduced a subminimum tip wage for certain occupations. The tip wage is currently $2.13 in Federal law and has been stuck at that amount since 1991. Laws in some states supersede the Federal tip minimum, putting the tip wage at $4 to $4.95. Tips are therefore, at least in a certain sense, a subsidy to restaurant owners and tips certainly are essential to workers, the majority of whom are women. Of course, restaurant pay is better in some states, in some restaurants and on some shifts than others. Here, however, are some numbers in the ballpark: The Bureau of Labor Statistics puts the median for front of the house workers at $8.94, which includes the tip. Considering back and front workers in the same category, the Labor Department says the average is currently $12.28. By the way, servers pay tax on the presumed tip plus the wage from the restaurant. If a diner doesn’t tip or tips less than the IRS presumes, the server still pays the tax. Read more