Restaurants did not fare well during shutdowns, with around 110,000 shut down because of the pandemic as of January 2021. Hopefully, some of these are up and running again, and to make it more difficult, on June 21, 2021 the Department of Labor announced a proposed rule change around the tip credit.
What is tip credit?
Under federal law (some states have higher minimum wages), the minimum wage is $7.25 per hour, but if your employee receives $30 or more per month in tips, you can pay $2.13 per hour and have the rest made up by tips. The employee has to receive at least $7.25 per hour, but only $2.13 has to come from the employer’s pocket if they get enough tips.
Employers can use the tip credit only when employees spend 80 percent of their time in tipped tasks, like waiting tables. So, if you have a server who also does maintenance work 25 percent of the time, you have to pay at least $7.25 per hour for the maintenance work, even if the employee received $1,000 in tips that week.
To keep reading, click here: Attention Restaurant Owners: The Tip Credit Rules Are Changing
As I understand it, the restaurant business (depending on geographic location) could simply pay the new $15/hour wage and eliminate all tips requirements from the patrons. I know for a fact, that here in my location all service workers get $15/hour and there’s a section on the bill presented to the customers that show a gratuity fee (about 20% of the total) already added to what the consumer pays. The customer can pay that amount or an amount of their choice but it is paid directly to the till not left on the table. What is not addressed in this article is the under-reported tip wages in those areas that pay servers lower than the minimum wage. If the state requires every employee to be paid a minimum wage of $15/hour then those tip wages also have to be recorded correctly too. I would like this issue addressed too. Like that employer has to monitor in detail, non-service job time, those servers should have to report all tip income. At least, in the states paying the higher $15/hour wage, the correct tax will come out of the paycheck, for the declared tip income, since it will be on record from the reciepts.
As an additional statement, there’s a way to review this legislation on the Regulations.gov site, where you can also submit comments until August 2021 for those interested in submitting how this would affect HR paperwork and job sites (restaurants, especially the small private ones)
You’ve never waited tables, have you? They tried paying high hourly wages in NYC and lost their best people. https://www.tvo.org/article/whatever-happened-to-the-no-tipping-experiment-it-failed https://www.businessinsider.com/danny-meyers-no-tip-policy-struggles-2017-10