(NEXSTAR) – Those working in the food service industry are, in most cases, paid a lower wage than the rest of us. It’s largely because they are expected to receive tips.
But, as many have argued, paying a server the federal minimum wage for a tipped employee, paired with the tips they receive, sometimes isn’t enough to reach the standard minimum wage of $7.25. This is pushing some restaurants to transition to a tipless style of business.
Current federal regulations require tipped employees — those who receive more than $30 in tips each month — be paid a minimum wage of $2.13. That server must then average $5.12 in tips each hour, meaning they would make the federal minimum wage of $7.25. If a server doesn’t earn enough tips in a shift to make $7.25 an hour, federal law says the employer must pay them the rest to reach that rate.
While this may differ for some states, others do follow that federal minimum requirement, including Indiana, where one business owner decided to stop accepting tips.
In 2021, Kurtis Cummings, the founder and president of Switchyard Brewing Company, decided to eliminate tipping at his Bloomington, Indiana, craft brewery. Instead, Switchyard employees are now paid at least $16.25 an hour.
“It’s the employer’s responsibility to pay their employees, not the customers,” Cummings explained to Nexstar. He also noted how factors such as the server’s gender or age, the weather, or the day of the week can impact how much – or how little – a server is tipped.
Researchers have even found the vast majority of people aren’t basing the tip they leave on service quality, they’re actually just following a social norm. And when it comes to the quality of service, Cummings said that any issues you had shouldn’t be taken out on the server’s income.
“It’s still more than likely the company’s fault because it’s the company’s job to train, right?” he explained. Plus, the promise of a tip doesn’t always guarantee good service. What does? Like any non-tipped job, it’s job security, according to Cummings.
Cummings said Switchyard’s switch to tip-free “has become a real job attractor.” Staff no longer have to worry about missing a weekend shift – shifts that typically are busier, increasing the chance at more tips – and the company can provide other benefits like paid time off.
While Cummings’ employees and most of their customers have taken to the idea of no more tipping, not everyone agrees.
Cummings explained that after Switchyard transitioned to its optional-tipping policy, some people – many from outside Indiana – began leaving one-star Google reviews for the business. It’s a relatively common trend, Mike Lynn, a professor of consumer behavior and marketing at Cornell University, told Nexstar’s KTLA.
Whether a restaurant adds a service charge or raises menu prices slightly, like Switchyard has, Lynn said that business will likely see their online ratings dip.
“It turns out that when customers evaluate restaurants’ expensiveness, they’re pretty much looking at menu prices, and that’s it,” Lynn explained. “We dismiss, or discount somehow, the fact that you’re expected to tip.”
Switchyard has been tip-free for roughly two years. Some, like Triptych Brewing in Savoy, Illinois, recently joined the movement, while others, like Optimism Brewing (which inspired Cummings) in Seattle and Zazie in San Francisco have been tip-free for years.