The Pros and Cons of Adopting a No-Tipping PolicyWeigh these factors before you decide to end tipping and raise wages or prices.
In big cities including New York and Seattle, the restaurant industry is watching what might be a revolution in American dining: the end of tipping. Several major restaurant groups already have adopted no-tipping policies in favor of paying employees higher wages.
“This is very seismic to our industry,” said Steve Zagor, dean of the School of Business and Management Studies Program at the Institute of Culinary Education in New York.
As minimum wages are poised to increase — the governors of New York and California just announced plans to raise their minimums to $15 for all workers — more restaurants will likely experiment with no-tipping policies.
Should you take the no-tipping plunge? Here are factors to consider.
Pro: The kitchen staff gets a boost
For some restaurants, eliminating tipping is a way to democratize pay.
“If the culture and philosophy of your restaurant says, ‘I want to do the right thing for my staff and the right thing is giving them a predictable rate of pay,’ then [a no-tipping policy] sets up an egalitarian system where the front of the house and back of the house get paid on the same basis, but not necessary the same amount,” Zagor said.
“It also gives employees comfort in the fact that they have a structure they’re working under so they’re not subjected to the whims of the guest.”
Con: The wait staff can take a hit
Though no-tipping policies can make wages more predictable for wait staff, they may result in less take home pay. Restaurant owners should be prepared for some backlash.
“Some waiters and waitresses will take a big pay cut,” Zagor said.
“There’s that recoil that says, ‘You’re cutting me out.’”
One solution, of course, is paying wait staff more per hour. At Dirt Candy, a vegetarian restaurant in New York that recently eliminated tipping, owner Amanda Cohen starts waiters at $25 an hour, so they take home around $200 a night. Cooks, dishwashers and bussers make less, but still a living wage.
“There will no longer be any $400 nights, when high rollers leave extravagant tips and you feel like a millionaire, but there will also no longer be any $100 nights when people stiff you and you don’t have full tables so you go home and don’t know how you’re going to pay your bills,” said Cohen.
Pro: Guests may love the new system
According to Zagor, adopting a no-tipping policy has many advantages for a business
controlling labor costs, not having to chase staff for tips to take taxes out — but there are also advantages for guests.
“It’s simple, he said. “You pay and leave. Just like you’re going to buy a shirt.”
Some diners may worry a no-tipping system will mean bad service, but Zagor said restaurateurs can avoid problems by hiring servers who are focused on customer service and monitoring their work.
Con: Guests may not understand the new system at first
To offset the loss of tip money, some restaurants raise prices on all food items or select dishes. Others, including Cohen’s Dirt Candy, add “administrative fees” and “service charges.” (Note that in some states, it is illegal to distribute service charges to back of the house staff).
If you’ve raised prices to compensate for a no-tipping policy, it’s important to communicate the policy to your customers to keep them coming back, warned Zagor. Consider placing signs in the restaurant or on tables, have wait staff communicate the change verbally and make it clear on the check.
Consult a lawyer
Switching to a no-tipping policy should be done very carefully and thoughtfully, Zagor cautioned. “Take some time and plan it out.” What works for one restaurant, such as raising prices, may not work for yours.”
The laws around tipping vary from state to state, and some states make eliminating tipping difficult, so Zagor suggested consulting a lawyer, as well as a restaurant consultant if you can afford both.
Cohen agreed working with a lawyer is key. “You need to find a labor lawyer you trust and involve them in the process from beginning to end.”