This is the sixth segment of our series analysing the many facets of tipping culture, speaking with those who advocate for a better way, and those who feel that the hospitality sector’s unique set-up works and should not be trifled with.
This week we speak with a seasoned Toronto restaurateur who questions some of the motives behind the movement to abolish tipping.
Good Food Revolution: Hello there, and welcome to Good Food Revolution.
Now, before we get started, would you mind telling us a little bit about yourself?
YHBS: I am a restaurateur. My husband is a chef and restaurateur. Our three well-fed children have all worked in our restaurants and we hope that this will encourage them to become orthodontists. I am also a recovering tax lawyer. The only thing I miss about being a lawyer is the paycheque, but I console myself with the knowledge that drinking at work is now actually a job requirement.
I have a blog (www.youhavebeenserved.ca) which features rants about the restaurant industry, as well as recipes and music playlists to cook by. I have also written a book about restaurant life and am currently seeking a publisher!
GFR: You recently published a diatribe on your website pertaining to the current discussions circling around the question of tipping. These two pieces made for some good reading, and it became obvious that you felt quite passionate about the subject.
They were titled Banning Tipping Is The New Organic (Parts 1 and 2), and your comparisons to Pantone’s infamous “Color Of The Year” certainly did raise a smile… and “blue collar washing” did make me chuckle wholeheartedly.
So… banning tips is the new organic? Why do you feel this to be the case?
YHBS: I don’t know about “diatribe”; that sounds like I’m mean-spirited. I’m actually a pretty cheerful person. I write my blog rants from the heart and, while I am trying to making a point, I attempt to do so with humour because “a spoonful of sugar makes the medicine go down”. That is also why there are lots of dessert recipes on my blog and plenty of chillaxing music.
GFR: Yes… I have to say I did enjoy many of your playlists.
YHBS: As I mentioned in my blog posts, most of us are influenced by trends. The problem with trends is that they can absolve us of responsibility, agency and self-awareness. Many of us express an opinion of sorts (our “choice” of nailpolish colour, hairstyle, vacation destination, dog breed, dinner venue, etc.) without really examining our reasons for doing so. In other words, we are expressing opinions without being informed. There are trends that may be unscientific, short-lived, or just stupid. I mean, whatever happened to wheatgrass, where is kale going to be in five years, and how come no one talks about Paleo anymore? And then there are trends that may become righteous, long-lasting, game-changing movements. Locavorism, sustainability, organic, non-GMO – these have stuck.
I’m the first to admit that I don’t know as much as I should about many things, and certainly could be better informed, so I try not to express opinions in areas in which I have little knowledge. But take “organic” for example. Is it a trend? Does it have legs? What does it even mean? Does organic mean safer, healthier, more economical, more environmentally-friendly or better-tasting? Does organic mean different things to different people? That’s what I mean by banning tipping is the new organic. I think some people may be jumping on the tip banning bandwagon because it is a trend (and one that results in a lot of publicity) without being adequately or appropriately informed. And, like the organic movement, banning tipping has an element of sanctimony and zealotry.
GFR: You put the blame for the ever-growing media swirl around the tipping debate firmly at the feet of NYC restaurateur Danny Meyer, and point out that you don’t feel that his company-wide banning of tips is quite as altruistic as it first appears.
Seeing as Meyer is viewed by many as the very-model of the perfect (read: successful) restaurateur, your comments obviously ruffled a few feathers.
May I ask you to explain your thinking behind this to our readers? (As I do think that you make a pretty damn good point)
YHBS: Last year I bought a dark grey Honda van. I knew I wouldn’t be the only person with a dark grey Honda van, but all of a sudden it seemed like everyone and their mother had a dark grey Honda van. I can’t even find my car in the parking lot at IKEA without clicking the “lock” button and following the honking and flashing lights. That’s how I feel about Danny Meyer.
While tipping has long been dispensed with in most of Europe, and never found even found traction in other parts of the world, as soon as Danny Meyer banned tipping suddenly everyone else did it, plans to do it, or is thinking about doing it. I have no doubt that Meyer’s decision to ban tipping was fantastically well-informed and researched to the max. I am sure it makes tremendous sense for his business or else he wouldn’t have done it. And since Meyer is the ne plus ultra of restaurateurs, everyone else jumps into his dark grey Honda van, even though they may not know where it is going or why.
A restaurant is not a hobby, a public service or a charitable organization. A restaurant is a business and, like any business, is designed to make money and generate profit. I’m sure Danny Meyer is a decent guy. But as the CEO and primary stakeholder of a billion dollar restaurant, catering, and consulting empire, I don’t think Meyer does anything unless he has strong evidence that it will positively affect his bottom line. There is nothing wrong with that. Banning tipping makes sense (and dollars, presumably) for Meyer or else he wouldn’t do it. But why does Meyer call his move to ban tipping an attempt to reduce wage disparity between the FOH and BOH? Why does Meyer engage in what I call “blue collar washing” what is an informed business decision based on circumstances unique to his business?
The “negasaur” in me sees the move to ban tipping as a way to access what would otherwise be the tip pool. Tips can constitute 15% or more on top of a restaurant’s sales, which is a serious and enticing chunk of cash flow to which a restaurateur does not otherwise have access. And new legislation in Ontario will outlaw the common practice of a restaurateur withholding a “house” portion of server tips, except as a means of redistribution to other employees.
Banning tipping and then instituting a service charge, administrative fee and/or price increase means restaurateurs will essentially own what would otherwise be tips belonging to servers. Of course, the argument is that the service fee, administrative fee or increased prices will then be redistributed in order to reduce the wage disparity between FOH and BOH. But who polices that? In my blog post I called it “pure capitalist genius cloaked as crusading socialist justice”.
GFR: Now, Meyer talks of eliminating the wage disparity betwixt Front-Of-House and Back-Of-House as being the motivation for making these changes to the operating policies of his establishments.
However, Professor Bruce McAdam points out in one of my earlier pieces some of the other issues that are perpetuated by the current tipping culture in North America.
Reading your site I see that you agree that the current system isn’t perfect, and you do give a detailed breakdown of both the pros and cons of tips being banned. May I ask you to share those with our readers?
YHBS: From a server’s perspective there are a number of advantages to the no tipping model. Firstly, there is certainty of wages: whether the restaurant is busy or slow, the server will earn an expected amount based upon an increased hourly wage rather than a tip-dependent one. Consequently, there is no disadvantage to working lunch over dinner, or Saturday brunch instead of Saturday night. An increased hourly wage also translates to increased unemployment insurance when the server is between jobs, increased workers’ compensation if the server is injured on the job, and greater damages if the server’s employment is terminated. Some have argued that dispensing with tips increases a server’s sense of self-respect as he or she can now regard himself or herself as a “hospitality professional”. That’s just lipstick on a pig; a server remains at the beck and call of a customer no matter what the server is paid, or calls himself or herself. Some people are great restaurant customers and some people aren’t, banning tipping won’t change that.
Even if there are any other upsides to servers of the no tipping model, all the upsides multiplied together with whipped cream on top don’t make up for the fact that I am convinced servers will make less money under this system. Not only that, but an increased hourly wage means more tax, and who doesn’t love that? Additionally, if, as an employer, you could have ten people making $10/hour or ten people making $20/hour, which would you choose? Since banning tipping means increasing wages for servers, I guarantee that one of the consequences of increased wages will mean shorter shifts, less serving staff on the floor, each of whom will be working harder than before and will be cut loose sooner when business trails off, making even more work for the servers remaining. Servers are as humanitarian as anyone else, but I don’t think you’ll find too many who are sympathetic to banning tipping as a means of reducing a wage disparity with the kitchen staff. Aside from tipping out to the kitchen, as is the practice in many restaurants, most servers won’t see it as their responsibility to subsidize what they regard as management’s responsibility.
As many people are aware, particularly those in the restaurant business, there are a lot of unscrupulous restaurateurs. Perhaps this is due to the thin margins, the constant threat of business failure, the fear of one negative Trip Advisor review, unspeakable stress, or just being a shithead to start with.
When I was a teenager I worked as the cashier at a casual restaurant. The middle-aged manager (who I always rebuffed when he asked me on a date) warned me that if my deposit were ever short that I would “have to make it up to him” in other ways (nudge nudge wink wink). When I complained to the owner of the restaurant, I was fired. When I complained about being fired to the owner’s wife, I was reinstated and the manager was fired. The ex-manager physically stalked me for months afterwards and, I am certain, was the perpetrator of the many obscene telephone calls I received at home. At one restaurant where I worked as a busperson while in high school, I was fired for refusing to “recycle” the ketchup in those little paper cups which I cleared from tables. Who knows what people dunked in those things? This was back in the day when you could smoke in restaurants and the little ketchup cups were often used as convenient ashtrays.
At another restaurant, a customer on the street-side patio built up a hefty tab and then took a runner. After unsuccessfully chasing the guy for a couple of city blocks, the owner of the restaurant told me that I would have to foot the bill. When I refused, I was fired. Anyone who has worked in a restaurant has similar (and worse) horror stories. If I were a server, I would much rather take my chances with a restaurant customer than managers and owners like the ones described above. And if some employers require their staff to work at least part of the day off the clock (as is an appalling and not uncommon practice, particularly in high end restaurants), I wouldn’t trust that person to be responsible for determining my hourly wage or my revenue share. As for sexual harassment, I would bet that most of the offenders are superiors (for lack of a better word) rather than customers, and I wouldn’t want those creeps determining what I should be paid.
The upside to cooks from banning tipping and increasing wages is, of course, an increased wage. What cook wouldn’t want that? Well, just as with servers, I predict that cooks earning more per hour will see reduced shifts and reduced staff. In addition, increasing wages for cooks won’t tackle the widespread and appalling practice of expecting cooks to put in some time off the clock.
What restaurateur in his or her right mind wouldn’t want fawning press adulation? What restaurateur wouldn’t want to be regarded as a righteous defender of the downtrodden and the saviour of, not only the restaurant industry, but humanity itself? What restaurateur wouldn’t want to get their paws on a cash flow of up to 20% of restaurant revenue? Danny Meyer himself acknowledged that the first full month of banning tipping and increasing prices resulted in his restaurant’s busiest, more lucrative month ever. But if the purpose of the price increase is to distribute profits more fairly between the FOH and the BOH, how is the restaurant itself more profitable? In Meyer’s own words, doing the right thing is the most profitable thing. But what came first, the chicken or the egg? Does it matter? In my view yes it does, at least when you set yourself up as a champion of worker rights.
Of course, the greatest benefit to restaurateurs from banning tipping and increasing prices is the unfettered access to what would otherwise be the tip pool. Margins in the restaurant business are so small and accountability so opaque that I have no doubt many restaurateurs will see the increased revenue, or at least some part of it, as a personal slush fund. Can we seriously expect that restaurateurs and managers who sexually harass their staff, or require them to work at least some part of the day for free, are really going to be fair about revenue sharing?
Are customers truly relieved that they no longer have to do drunk math? Are customers really happier when they pay more and have less agency? As I understand it, many customers are uncomfortable with the no tipping model at some restaurants and leave a tip anyway. So what’s the point? And where does that money go?
It’s not all sunshine and roses for restaurateurs who institute a no tipping policy. Increased revenues means more tax, bigger credit card fees and, for restaurateurs’ whose occupancy cost is calculated as a percentage of revenue, increased rental payments. That’s not even considering the increased administrative costs, increased payroll taxes, potentially greater threat of employee defalcation, and difficulty in hiring and retaining FOH staff. I just don’t believe that the best servers in town are going to be satisfied with the no tipping model. Unless banning tipping goes industry-wide, I expect that restaurants that do implement the practice will have a smaller and less experienced pool of servers to draw from.
One of the arguments for banning tipping is that it makes a customer’s life easer: no more difficult calculations after a night of drunken debauchery, and the end of awkward, icky and pressure-stricken speculation about how much or how little to tip. This is just dumb. If you can’t calculate 10%, 15% or 20% in your head, then you have no business going out to dinner, or having a job that pays for that dinner, because you’re clearly not too bright. I want your job as it obviously pays you enough to dine out, but does not involve pressure-filled scenarios or even simple math. I find it awkward to pass the guy sitting on the sidewalk outside of Starbucks but instead of banning Starbucks I give the guy a buck.
Another argument for banning tipping is that it makes a customer’s budgeting easier. I’m not buying this one either. Most people don’t know what they are going to order for dinner when they go out a week from now, or how much it is going to cost, so what difference does some very simple, grade school math make?
Some have suggested that by removing the ability to “punish” poor service with a bad tip, dissatisfied customers will, instead, approach management with a complaint. Anyone who has been in the restaurant business for five seconds knows that is baloney. Either you are the sort of customer who speaks directly to a manager with a complaint or, more likely in my experience, you are the sort of customer who rages anonymously on Trip Advisor, and banning tipping isn’t going to change that. If, as I expect, that banning tipping and increasing wages will mean not only less FOH staff but also less experienced FOH staff, the likely result will be increased complaints to the manager and multiplied customer rants on Yelp.
It has also been suggested that customers will feel better about themselves knowing that the increased price of their dinner ensures that everyone at the restaurant is getting a decent salary. This argument is so bogus I don’t even know where to begin. Most people don’t know and don’t care that their clothes were manufactured in foreign sweatshops or that their dinner lived an ignominious life before it ended up on a plate. Most people just want cheap eats and cheap clothes. I’m not saying that that’s right, because it’s not, but that’s just the way it is. I suspect that tip-included pricing is motivated by the bottom line, and not an actual or perceived bottomless heart or sense of social justice on the part of the restaurateur or the customer.
Banning tipping removes, at least in part, a customer’s ability to pay based on his or her determination of value. Unless a customer can opt out of tip-included pricing, it means that the customer will pay more even when service is abominable. From a customer’s point of view, it is irrelevant whether he or she pays $100 for dinner plus a $20 tip, or $120 with the “hospitality included”. Except that I don’t see how banning tipping and adding a 20% service fee or administrative fee, or increasing prices by 20%, means that all employees, including the BOH, get a raise. In order to keep servers whole AND increase cooks’ wages, the service fee, administrative fee or prices would have to increase by MORE than 20%.
At Meyer’s restaurants, the prices went up on some items by 35%. At the end of the day, at Meyer’s restaurants and at mine, the customer pays not just for the food on their plate but also every single one of the restaurant’s other expenses like payroll, rent, electricity, taxes, bank charges, linen costs, licensing fees, accounting and legal expenses, etc. How management determines an appropriate charge for the food and services the restaurant provides, and how management divvies up what is paid to employees, landlords, suppliers and so, are business decisions (subject to applicable law) not social justice decisions.
When gas prices soared a couple of years ago, my linen supplier added a “gas surcharge” to my invoice. This was in addition to the “environmental fee” and the “delivery fee” and the “inventory fee”, all on top of what it costs to wash the tablecloths. I told the owner of the linen company that I really wasn’t interested in his accounting practices, but that if he truly wanted to be transparent, he should also include his “profit” as a line item on my invoice. Similarly, I don’t believe that my customers care about my restaurant’s internal accounting practices or the justifications for them, as long as they feel they are getting good food for good value. And I’m pretty sure my customers wouldn’t care if my employees got a raise as long their own pocketbook weren’t affected. Banning tipping, increasing prices, altering employee wage structure and then calling it wage fairness is just sexing up what amounts to accounting.
GFR: Coming at it from a personal place, I haven’t worked in the industry for some six years or so, and in researching this series, thinking back to my time working on the floor as a Sommelier/Manager re-opened some painful old wounds.
Professor McAdam made reference to the transitory nature of the industry, both back and front of house, and I remembered, back then, seeing how much all of our servers were making in comparison to the managers (including myself) and asking “why am I doing this again?”.
There were a number of occasions where I almost threw in the towel and changed careers, as it didn’t make any sense to me how this kind of wage inequality was the norm. (management were not part of the tip pool).
Eventually I did change careers, moving laterally into media and co-running Good Food Revolution as a full-time job. I simply couldn’t justify staying in the industry and making so little money (especially in comparison to our serving staff) for so many hours. It’s hard to describe the resentment I felt about that, and I know for sure I wasn’t the first or last manager with such emotions.
How do you think the system could be changed to encourage management to stick at it?
YHBS: I wish I could answer that question. I do find it interesting that you left the restaurant world because the money wasn’t enough to live on and I left the law because the money wasn’t enough to make up for the life I was living. Let me just say that if I thought that the only reason to pursue an occupation was make a lot of money then I would still be a lawyer, and I would have talked my three children out of careers in fine art, theatre and opera, respectively.
Having a job you love, as opposed to a job you need, will not necessarily feed your family or pay the rent. The only reason that my husband and I own a house is because I was a lawyer. The only reason that we were able to get a bank loan to purchase our first restaurant is because I was a lawyer. Some occupations pay well and some don’t. I’m no economist, but I expect that higher paying jobs usually require greater levels of education and longer periods of experience. Some positions pay well because they pose greater risks or have greater responsibilities than others.
There is also the supply and demand factor, the public perception of relative value, and the strength or weakness of individual and collective bargaining power. If you are looking to earn a fortune, don’t work in the restaurant industry – in any capacity. In addition, you probably want to stay away from anything to do with the arts, and everything that smacks of mothering and other career paths traditionally regarded as “women’s work”. Some people have jobs, some people have careers and some people have vocations. It is my observation that people with vocations (cooks, artists, writers, clergy, moms etc.) don’t usually make a lot of money.
Generally speaking, the least accomplished and the least experienced are paid the least. In addition, and just as with any job, you have to pay your dues. You have to prove your worth and put in the time to climb the corporate OR the restaurant ladder. And, at some point, you might need to re-examine your career choice. Working in the restaurant industry is tough and it’s not for everyone. It’s definitely not for anyone looking to get rich quick, or ever.
Notwithstanding restaurateurs like Danny Meyer (and probably only Danny Meyer), and despite what the non-restaurant-owning public would believe, the restaurant business is not lucrative. The luckiest ones among us are lucky to make a living. (Remember what I said above about “vocations”?) According to Restaurants Canada, the average profit for an Ontario restaurant is about 3%, making it unreasonable to expect that BOH wages can be increased out of restaurant profit. That leaves increasing prices, cutting costs or tapping the tip pool. As we have seen in Meyer’s case, a sure-fire way to get gold stars, invaluable free press and Robin Hood’s stamp of approval is to redistribute what would otherwise be server tips. Meyer has also expressed the view that tip banning will help to attract AND retain management. We’ll see.
GFR: Now it’s not just managers who can get sick of the system. I was most impressed by your strategy for retaining dishwashers and cooks. Would you mind sharing this with our readers?
Anyone who has worked in the restaurant business for five minutes has stories of being treated as a second-class citizen. Sometimes the perpetrators are owners, management or colleagues, but often they are the customers. A while back, one of my old law school professors came for dinner at our restaurant. Since (mumble mumble) years have passed since graduation, he didn’t remember me. I introduced myself as one of his former students and he asked if I were the proprietor of the restaurant. When I replied that yes I am, he said: “That’s good. I would be very upset if one of my former students was just a waitress.” Ouch!
Folks in the restaurant industry often have to contend with rude, dismissive, insulting and snobbish customers; it goes with the territory. Fortunately, most of our customers are not like this. In fact, I can usually tell when a customer has himself or herself worked in the industry . I surmised that one of our customers, a famous Hollywood actress, had once worked as a server because she maintained eye contact while I recited the evening specials, she smiled throughout all her interactions with our staff, and said “please” and “thank you” far more often than was truly necessary. It is astonishing how grateful we are, as industry veterans, when a guest is merely polite, pleasant, gracious, understanding or accommodating.
Because we know how devastating it is to be treated poorly, and because all those years of remembering orders and recipes has developed our memory muscle for recalling past insults and shame, we treat our employees with decency, respect and compassion. It’s not what you call a “strategy”; that sounds calculating. It’s really just empathy. Simply put, we are as nice to our staff as we are to our customers.
Many restaurants are a home-away-from-home not only for the customers, but also for the employees. Many restaurateurs regard their staff as a family of sorts, although not in a paternalistic way. We pay our staff a decent wage, as much or more than the industry standard. We socialize together. We eat dinner together. Since we hire our staff based on their personality and their “fit” (and most have been with us for years), we all seem to genuinely enjoy and help each other. They also see how hard we work (especially my husband), and for how little, and they know that we are not dilettantes.
GFR: How do you feel about tip outs to the house? What do you feel is fair?
I have no problem with tipping out as a means of redistributing tips between all members on the restaurant team (server, cook, dishwasher, busboy, hostess, etc.). I also agree with the new law in Ontario which prohibits employers from taking a “house” portion of tips. The new law, however, permits employers to withhold up to 2.5% of tips to cover credit card charges. Outrageous and wrong. Credit card charges are the restaurant’s cost of doing business, not the server’s.
GFR: But even if the establishment recognises the kitchen and they get a few dollars, it’s really just a nominal amount, isn’t it, and it doesn’t really go anywhere near lessening that wage disparity?
I guess it depends on how much the servers are required to tip out and how many people the tip out is shared with. I know some restaurants require servers to contribute to 10% of sales (not 10% of tips). If the server sold $2,000 in a shift and made 15% in tips ($300), he or she would be required to contribute 10% of sales ($200) to the tip pool and would leave with the remaining 5% ($100). That’s a lot of redistribution, assuming that the tip out goes to the kitchen staff and not to the house! It also assumes that servers don’t get stiffed by a customer.
Just for the sake of argument, who is complaining about wage inequality between FOH and BOH? Not the FOH for sure. Not customers. Not cheapskate restaurateurs, except to the extent that they can’t find cooks who will work for minimum wage. The people who complain about wage inequality are, obviously, cooks and I’m not saying I blame them. Instead, I blame celebrity chef culture, Anthony Bourdain, the Food Network, irresponsible culinary schools, aspirational Instagrammers and (I’m gonna catch flak for this) millennial entitlement.
When I articled after law school, I worked at a big, fancy, famous Bay Street law firm. I made good money, but I spent a lot of time doing mindless, repetitive, boring tasks. Friends who worked at very small firms made significantly less money, but they learned a whole lot more than I did and a whole lot faster.
Culinary school grads fall all over each other to work at the restaurant equivalent of Bay Street so they can claim tenuous connections to celebrity chefs, even though they are often expected to work for low wages (and occasionally for free), and spend their days peeling carrots or constructing artful assemblages of fennel pollen. Whereas, at smaller restaurants, new cooks often learn more and learn faster than their well-connected and aspirational friends. And, unlike small law firms, and in order to entice cooks, those smaller restaurants often pay more.
On several occasions, and for different restaurants, I have posted requests for apprentices on the job boards of various culinary schools. I don’t think a single candidate has ever responded, notwithstanding that we pay more than the industry average, offer better work/life balance than most, never require anyone to work one second for free, and treat our staff fairly and with friendship. So I also think cooks need to take some personal responsibility for making their career choice, finding appropriate jobs, negotiating acceptable wages and refusing to work any part of the day off the clock just because some famous-in-his-own-mind chef asked them to.
The fact remains that the restaurant industry is not particularly lucrative for anyone (except, as noted, Danny Meyer). For every server who allegedly “makes out like a bandit” (as mentioned in one of your earlier posts), there are probably dozens more who barely scrape by. There are just too many restaurants in Toronto (our restaurant density is higher than NYC) competing for too few diners. On top of this, many diners flit from one hot new restaurant to the next making restaurant ownership that much more tenuous, resulting in decreased revenues and decreased opportunities to pay decent wages.
GFR: I feel that part of the solution would be to provide all staff with a living wage, but with the downward pressures forced upon the restaurant industry in the past fifteen years or so, margins are so painfully wafer thin that this is an impossibility for many, if not most, owner/operators.
Let’s say that 3 to 4% would be the average margin for a place that wasn’t fast food, a nightclub, or a full-on bar. This number utterly shocks people who are in other industries, and they ask why anyone would ever get into the restaurant business.
It’s one of my developing theories that today we have so many other additional expenses in our lives that weren’t really there 15 – 20 years ago (Netflix, cloud storage, Playstation Plus/Games With Gold, high speed internet, smartphones and associated bills, tablets, apps, freemium games, digital subscriptions, ever-increasing banking charges… I guess we could just blame technology here!) and this is eating into people’s entertainment budgets, leaving less to be spent at restaurants, ergo the dining public still expect restaurant meals to cost about the same, and we know that they can be extremely price sensitive… and what with the current economy…
We also know how much food prices have gone up over the past five years, and yet customers still expect a $30 steak from five years ago to cost around about the same today. And with this downward pressure, it’s got to the point where there is nothing else left to shave, no more corners to be cut, no more portion management, no more hours to be cut, no more efficiencies to implement without seriously impacting the quality of the product that is “the restaurant experience”… and this is why so many are calling where we are at today a broken system.
Surely something has to give? A radical pricing readjustment? Forcing the dining public to face the true cost of their restaurant experience in the menu prices? And perhaps this is where doing away with tips comes into the equation? Your thoughts?
YHBS: What if everyone were paid $100 an hour? That seems like a lot of money doesn’t it? It seems like much more than enough money. But if everyone is paid $100/hour, that means everyone has to pay a lot more for whatever it is that they’re buying so that everyone can be paid that $100/hour. Eventually, $100/hour won’t be enough money because everything will cost so much more. Obviously, our current minimum wage as it stands is not enough for most people. I have no idea what the exact hourly minimum wage should be in order to constitute a “living wage” that doesn’t result in the system breaking down. But whatever that living wage is, it still wouldn’t address the complaints about wage inequality created by tipping, or the slim and getting slimmer margins in the restaurant industry.
Don’t get me started on people complaining about paying $30 for a steak. Most people have no concept of how restaurants operate and why menu prices are what they are. Many people cannot understand why they pay $10 for a steak at Loblaws but are charged $30 for the same steak in a restaurant. I can’t tell you how many times one of our customers has said something along the lines of: “the restaurant is so busy tonight! You must be making a lot of money!”
As I indicated in my blog pieces on the subject of tipping, our current system is archaic. Furthermore, tipping has been dispensed with elsewhere in the world without resulting in restaurant or societal entropy. Many people feel that the current system is “broken”. That may well be. Maybe the restaurant industry does need the sea change of a radical pricing adjustment. But I don’t know that banning tipping is necessarily the answer. All I know for sure is that Danny Meyer thinks it is the answer. At least for him. That may be enough for some people to follow his lead. But I think I’d rather wait and see how Danny Meyer’s experiment turns out.
GFR: You also mention some of those pushing for a banning of tips are suggesting that there would be other victories for social justice on top of putting an end to the age-old FOH/BOH wage gap. They cite ending racism, classism, and sexism in the restauarant? I’d love to hear your thoughts on that theory, as I know that you don’t exactly agree with it!
YHBS: Meyer’s decision to ban tips is widely reported as game-changing social justice. Banning tipping will, Meyer assures us, help close the ever-widening gap between FOH and BOH wages. I’ve heard others claim that because tipping is rooted in racism, classism and sexism (since the tipping economy is largely relied upon by women, low income earners and/or people of colour), that banning tipping will ameliorate racism, classism and sexism. Some have argued, for example, that instances of sexual harassment faced by female servers will decline when female servers are not tip-reliant because they will no longer have to tolerate harassment from their customers. I’m sorry, but that’s just ridiculous. Men will stop sexually harassing women just because the tip is included? As if.
It seems like more of an incentive for harassment if you ask me. Employers are already legally responsible for ensuring that their staff is free from sexual harassment, or else face having their pants sued off and their bare bums pinched. The companion argument is that servers themselves act upon racist, sexist and classist assumptions about customer tipping behaviour when they give more attention to certain people and less attention to others. Consequently, so the argument goes, banning tipping will mean that servers will be equally attentive to all customers. Say what? How could anyone argue with a straight face that racism, sexism and classism will be solved by paying everyone enough money per hour to forget about centuries of enculturation? Nonsense. Claiming that banning tipping will reduce sexism, racism and classism is like claiming that racism was solved when Barack Obama became President. As far as I am aware, even Meyer isn’t claiming to fix racism or sexism by banning tipping. Meyer had the good political and populist sense to model himself after Robin Hood and not Gloria Steinem.
GFR: Now onto the the big question in my mind. The proverbial elephant in the room. The question of tax.
I don’t think that it is just the whole Danny Myer thing that has people in the industry talking about what to do with tips… I am thinking that it’s partly down to the fact that the Canada Revenue Agency are imminently about to descend upon Ontario restaurants like a tonne of bricks with the mandatory installation of the digital sales recorders (or “black boxes”) that have been a fact of life for Quebec since late 2011. This will obviously have a massive impact on all servers’ tips as they will all have to be taxed at source by the employer.
I believe that forward-thinking restaurateurs are becoming part of this tipping discussion as they are looking for a way to weather this coming storm without losing their employees or their shirts, and also to cover their arses as they’ll become legally/fiscally responsible for all of this and the additional source deductions involved. How do you feel this is going to shake down?
YHBS: I thought digital sales recorders were intended to prevent restaurateurs from “zapping” sales from the point of sale system in an attempt to reduce sales tax liability? In any event, I would expect that most restaurants already employ some kind of digitized POS system already and are, like any taxpayer, subject to audit at CRA’s whim anyway. If the CRA were to require employers to report and withhold tax on individual server tips, my objection would be the administrative headache, the extra work it would create for me and, most significantly, the increased employer portion of payroll taxes that would result. But, as a taxpayer, I’m all in favour. I suppose I’d be fully on board if the CRA tackled potential tax cheats like those listed in the infamous Panama Papers, for example, with the same zeal they would pursue server tips.
Maybe banning tips and increasing prices gets around the additional headache, time and paperwork that would otherwise be involved in tracking, reporting, withholding and remitting tax on server tips. If, however, a price increase were used to redistribute wages between FOH and BOH, I don’t think that the employer portion of payroll taxes would be any different from the portion that would be due if the employer were required to withhold on server tips. From my point of view, as a restaurateur, minimizing my administrative paperwork, preventing headaches, and avoiding tax liability is just about the best reason I can think of to ban tipping. That might be the tipping point, so to speak, for me.
GFR: Currently servers voluntarily state the additional income they make from tips on their T1 tax form, but it’s common knowledge that the majority only declare a fraction of their annual monies from tips. Which means some pretty morally indefensible tax evasion, no?
I mentioned this little issue in a previous piece and promptly received a vaguely threatening anonymous email telling me to keep my nose out of the subject matter at hand! Who would have thought that my website musings would inspire such mobster-like behaviour?
Just the other week I spoke with a local restaurateur who has all of his staff sign a form saying that they will truthfully declare all monies earned from tips on their annual T1 form. Whether they do so or not is, of course, up to them, but I guess it puts the establishment in a safer position when the Taxperson comes a knocking.
What’s your take on the whole tax question? Yes… that rather sticky question.
YHBS: I express no opinion about other people’s tax liabilities, duties or responsibilities; I gave up that line of work a long time ago remember. I will say that if my employer asked me to sign a waiver like that I would quit. Someone so keen on covering their own ass is probably not looking out for mine. Besides, it’s not my employer’s business to be involved in my personal affairs. That’s some pretty thin edge of the wedge stuff. What’s next, a morals pledge? And I would disagree that an employee declaration puts the restaurant in a better position if the CRA were to come knocking. You can’t opt of your responsibilities under the law and you certainly can’t foist them on to your employees.
GFR: Thank you so much for your time. You informed opinions and insights are most appreciated.
Edinburgh-born/Toronto-based Sommelier, consultant, writer, judge, and educator Jamie Drummond is the Director of Programs/Editor of Good Food Revolution… And, for the record, although he has worked in restaurants since he was around 18 years old, through circumstance he has never relied upon tips as a major portion of his income ; from Michelin recognised establishments in the UK (where tipping wasn’t a major thing), through a private club (where tips were forbidden), to a management position (that saw no part of the tipout), he’s never really benefited from tips.