By Andrea Pyros
Should restaurants do away with tipping and switch to a service-included policy?
News that famed New York restaurateur Danny Meyer plans to eliminate tipping
in all 13 of his Union Square Hospitality Group
restaurants has chefs, restaurant owners and diners all taking notice. Meyer’s “hospitality included" move, which will impact renowned spots such as The Modern, Gramercy Tavern and Union Square Cafe, is aimed at making salaries fairer between the front of the house, where tipping is allowed, and the back of the house (think dishwashers, cooks and reservationists) as well as addressing other industry issues.
Meyer’s prominence in the dining world means the decision will have major ramifications. We looked to some of the Rural Intelligence
region’s top food professionals to find out what they think about the issue, and how it might affect our area.
Josephine Proul, Chef and Owner, Local 111, Philmont, NY
I was right in the middle of getting a worker’s comp audit — I passed it just fine — when I heard [about the no-tipping policy]. I have to pay each month to worker’s comp and project how many wages I am going to provide. Tips are not included. My first thought was, “I can’t do [service included], no way, my worker's comp is already so high." I’d pay more sales tax, more withholdings, more worker's comp; everything would go up.
There have been some pretty big tipping scandals
lately with the house meddling in the tip pool, which has caused class action lawsuits.
If you are a large corporation, then moving to a non-tip system where you are looking for an expense to write off makes sense, but with me it would force me into the red. This would price me out of the market; I could never have a $40 price point. I would have to pull a lot of people off the floor, and it would take away their hours so they might need to find another job. There’s a stigma that the back of the house doesn't make as much, but the front of the house has slow nights, too.
Maybe instead of taking out tips they should reform tipping so that the pool does benefit the back of the house. We pool tips among the waitstaff here and everyone works together. It creates more of a camaraderie vs. “this is my section, these are my tips." And I pay my kitchen staff very well because I value their good consistent work. I don’t know why these restaurants are not paying their kitchen help!
I see both sides of it but, long story short, my servers would be so disappointed and this would sink me as a small business owner.
Josh Kroner, Chef and Owner, Terrapin Restaurant, Rhinebeck, NY
Photo: Roy Gumpel
The points that Danny Meyer makes are really valid. It’s a terrible system. I like the system in Europe. There they are professional servers and it’s a professional industry. Here you feel like you’re asking for handouts so it’s hard to embrace the profession. I’m trying to gauge what people’s response to [switching to no-tipping] would be, and people say, “What if service gets terrible?" But why would that be true? Why does anyone do a good job? Because they like their job and they like doing what they’re doing. Not because they’re getting tipped.
It just seems, as an employer, it would be so much better to not have it based on tips, but instead say, “Okay, I am going to train my staff and pay them really well and have the best staff around, do all the right things." It’s no secret that happy people make good servers and good food, and if you have a staff that is happy then you are going to have a good restaurant. That’s been my success. I try to take care of my employees and I think it shows with the longevity of my staff.
But I’m scared of losing the customers. Let’s say my entree is $28 and now it has to be $33 [to reflect hospitality included]. People will notice that and might not even understand it. They might just think, “Terrapin has higher prices than other places in our area." You're going to lose a percentage of customers who don’t take enough time to figure out what’s going on with the higher prices and why it’s set up like that.
We have a tip-pooling system [for the front of the house] but it should be spread out a bit more evenly. I’m keeping an eye on the trend. It’s the customer’s point of view I’m most concerned with in making this change. With Meyer doing this — and I think he’s great for doing it and he’s doing it for the right reasons — it’s probably inevitable, but it’s a challenge for sure.
Chef John McCarthy, The Crimson Sparrow, Hudson, NY
I think we're probably going to see this [no-tipping] trend more and more. Once more people realize you can do this, and the American diner becomes comfortable with not leaving extra money on top, it’s going to professionalize the entire restaurant industry. I’m seriously considering doing this very thing. We've talked about it not only as a way to pay everyone better but to inject some degree of certainty into the equation.
In the city there’s a real issue getting qualified kitchen line cooks and prep cooks, and my experience in the Hudson Valley is that times a hundred. It’s hard to find kitchen staff. There are a myriad of reasons for that, well articulated by Danny Meyer and others, but 45 minutes away we have the CIA educating future cooks who are graduating with significant debt. If there is any hope for getting young people into the kitchen, they need to make more money.
I was a lawyer for many years and the thing that has been missing in this entire discussion is the fact that the tips provided by the customer by law cannot be shared with the back of house. This situation where the front of house is high-fiving [after a busy night] and the kitchen staff are in the back going, ‘Man, we really sweated that out,’ could be made a bit better if the New York legislature would consider allowing such pooling. What we have tried to instill in our operation is that the whole restaurant is considered as one entity, with front and back working synergistically.
The idea is to really consider whether this proposal can be monetized properly so I’m not cutting front of house by 30 percent. That’s not fair to them; they're doing a job and anticipating a certain level of pay, and I’ve had people here who have been with me since day one. There are many other moving components, too. The IRS now treats mandatory tips differently that voluntary tips. For example, if I have a party of six or more and a 20-percent gratuity is automatically added, the IRS said that’s no longer a tip, it’s salary. It became a huge issue for smaller operations like myself that can’t afford a lot of the accounting and other things that go into compliance to track what was salary and what was tip. Every time there's a change in regulations and meddling by the legislature, they have the best intentions but an utter and complete lack of understanding of the operation.
I think you’ve got significant tax issues here, and that’s an expensive process, but Mr. Meyer is the standard and I think at the end of the day he's going to make sure he doesn't hurt his employees. It’s incredibly brave and he's extending a significant amount of financial capital and reputation capital to do something he's thought long and hard about to help this industry. I'm so glad he’s trying it, I really am.
Rachel Portnoy, Co-Owner, Chez Nous Bistro, Lee, MA
Photo: Tricia McCormack Photography
This is very complicated and I appreciate that smart, successful restaurants are putting their heads to a solution, but I don’t know what's going to happen. I don’t see everyone jumping in. There is no perfect solution. I’m a pastry chef and I run the front of the house, but previous to that I was in the kitchen where I was working twice as long as the servers and making half as much as they did. I always said, "When I have my own restaurant, I'm not going to have an unfair pay structure." We pool tips and the staff loves it; it makes everyone work better as a team and that's what the customer should see.
But I was fascinated when I saw Mr. Meyer say he can’t find kitchen staff, because we can’t find cooks up here, either. I thought it was because we’re in the Berkshires, but it turns out that even in New York, Los Angeles and Chicago, there’s an industry-wide kitchen shortage. We pay extremely well, we provide paid vacation and pay for health insurance but we could not find anyone to work in our kitchen! This year what we did was import people on a one-year French visa and we’re housing them, but my husband still can’t find a sous chef after two solid years of heartbreak. I really don’t think it was money related in our case.
The one thing that makes our living possible is the tax credit for all the tips and you’d be giving that up. In Massachusetts last year they changed the tax structure, so if you say parties of six or more are gratuity added, that is now salary and you have to separate it out. Danny Meyer can absorb this because he has a huge empire, but the move to no-tipping is not doable for a mom-and-pop operation like ours. It would kill me to raise prices more than 20 percent. I’m not saying it’s a bad idea, but it’s not feasible for places on a smaller scale.
Laura Pensiero, Owner, Gigi Hudson Valley, Rhinebeck, NY
I'm for paying people for what they are worth. I know my staff and they serve my clients well -- they know the brand, the menu, the beverages. They should be compensated for that, and not by the customers but by the business. I'd rather pay people for their value and let customers tip for "exceptional," which is what gratuity was supposed to be. I love a career waiter, which is so rare in this country but so common in Europe. If I go to a restaurant in Italy or France, I can watch one waiter run an entire room better than six people can do here. It’s amazing!
Do I really have to re-hire people every spring? I'd rather keep great employees and not have them feel like they have to figure something out for the winter. I understand things from their point of view, but it’s exhausting as an owner because people can't make an honest wage in the winter based on tips, so they jump to another job. For a small business, like most restaurants are, to reboot, re-hire and train every spring to give customers the best knowledge and great staff, it's complicated and it's hard. If there were some sensible arrangement for restaurants to budget, it would be great to spread out payments.
But it’s very challenging, given the setup right now [to switch to no-tips]. Small businesses are taking enough of a beating. If they'd allow us to pay people without being taxed on it unfairly, I would love it, because the tipping system is so wrong on so many levels.
If they want to include a tipping system, let's do a pool at the end of the night [with the entire staff]. There is no “I" in the restaurant business. Right now it's a disengaged system; the kitchen works hard to produce great food and they hang out after hours with the people who work in the front of the house who have cash in their pockets, but everyone worked equally hard that night. It seems there is an absurdity to this that anyone would admit. It does not create a team. If we want the best service for our customers, then we want professionals serving them, and we should be able to pay people who are equally invested in the success of the business without being taxed on that!
David Wurth, Chef and Owner, CrossRoads Food Shop, Hillsdale, NY
Servers work very hard and they're asked to maintain a lot of knowledge about the food and the wine, and they represent the restaurant in a very important way. They are the face of the restaurant and there is a lot of responsibility. That said, the cooks and the dishwasher contributed to that in a substantial way and they too should be rewarded. I understand the goal of the move that Mr. Meyer is making in striving to stabilize and eliminate the huge pay disparity when a server is making $300 on a busy night and another person is making $100.
If a restaurant is able to predict its revenue, then it makes sense to put this policy into effect. At Danny Meyer’s restaurants, he can probably say they are going to make X amount of dollars on any given night; I would think it’s a pretty solid number that he can count on X thousand and divvy it up among his staff. If you don’t have that ability, it’s riskier for the restaurant because they are guaranteeing the wage of the server based on tips, regardless of how much the restaurant makes. As it pertains to our area, we are a seasonal place and we do better business between Memorial Day and Labor Day, and that has to be taken into account. I don’t how this could be done, you have to figure that piece of it out.
It’s challenging and maybe even a little scary, but what owners may get out of it is golden as far as commitment and longevity from the employees. If this brings the [back of the house] up a few steps and they are doing better as a wage earner, it helps everyone. The mood is better, the feeling of the team is strengthened and the customers would pick up on that and want to support a business where there is that feeling of equal pay.
Scott Short, Proprietor, Kemble Inn | Table Six Restaurant, Lenox, MA
This is a complicated issue and goes beyond just server pay made up mostly by tips left by customers. I think that if consumers are interested in more fully understanding the costs of dining out, this extends further than just the cost of labor, but equally important is the cost of food and ingredients that go into dishes.
Restaurant margins are razor thin, and so while I applaud the notion customers have of wanting to have more reliable pay for workers in the restaurant business, I hope that over time this view will extend this fairness to the food purveyors, farms and other ingredient suppliers, too. Quality, non-scary, not-laced-with-chemical ingredients are expensive. When you see a $5 burger, or an all-you-can-eat something or other special, and you wonder how a restaurant can afford to do that, the first question everyone should be asking themselves is “What the heck am I actually eating!?" Stepping back to look at the big picture, this could be a real opportunity for consumers to understand what it truly costs to provide quality food, with quality service, in a delightful restaurant setting.