Why Some Restaurants are Changing the Tips Hierarchy

No matter how you look at it, tipping has always been a highly contentious subject in the restaurant industry. There are patrons’ perspectives to consider, but even within the bounds of a restaurant’s walls, tips have been a sore subject.

Some patrons have long disliked needing to tip on service or have felt that tip expectations are too high. Others feel that restaurants should be paying workers better so that tips are no longer necessary.

The reality is that owning and operating a restaurant is a financially precarious venture. The ability for a new restaurant to pay above minimum wage for regular staff is not feasible in the majority of cases.

Tips are the way in which consumers can subsidize the costs of owning and operating a restaurant. They pay for the food, and they share in the cost of the staff.

But within restaurants, tip allocation has traditionally been unfair. Typically, servers take the lion’s share of the tip and doll out a very small percentage (between 1 and 5 percent) to support staff and the entire kitchen.

The kitchen staff receives the tip out from all of the servers on staff and can share it amongst themselves during the night. But more often, the kitchen manager will save all the tips for a given amount of time (usually 1-2 weeks) and distribute the earnings-based again on the hierarchy within the kitchen.

For better or worse, this is the way tipping has traditionally functioned. Big changes have been made to this scheme with certain technologies that make tipping more transparent and tip pooling, which can result in a more democratic method of distribution.

The Historical Tip Hierarchy of Restaurants

The hierarchies within restaurants and dictate the distribution of tips have been a major point of contention since long before the pandemic.

In America, servers are not subject to the same minimum wage standards as most other workers, including kitchen and support staff. Servers make well below minimum wage with the expectation that tips will subsidize their income to a commensurate level with other workers.

Kitchen staff, on the other hand, do make at least minimum wage. Experienced cooks will earn even more. These wages are subject to taxation, so the belief has been that kitchen, and front-of-house staff would wind up making around the same amount.

However, the minimum wage for servers has risen, as has the tipping norm. What’s more, the vast majority of tips go unreported, with an estimated $11 billion per year of unreported income.

Both have resulted in servers taking home much more money than the kitchen staff, who arguably, are taking on a larger share of the work and responsibility.

What’s more, there has not traditionally been a lot of transparency with regard to tipping. The kitchen does not know if they are receiving their fair share, and even other servers do not know how they measure up with one another unless they opt to disclose the information in conversation.

While this phenomenon has been ongoing for decades, it was never so apparent as during the pandemic. With lockdowns, restaurants did whatever they could to keep on as much of their staff as possible.

However, the only services that restaurants could really offer were take-out or delivery. This meant that no front of staff needed to be there, or maybe just one or two to take orders and hand out take away packages.

In this reality, it became clearer that while the front-of-house staff was receiving more contact and, therefore, more exposure to the virus, they were doing even less work than before and still taking home more in tips.

As a result, the democratization of tip allocation rapidly increased as restaurant roles also changed.

Moving Toward a More Democratic System

Tip pooling has long been an outlier in restaurant tip allocation systems. This system can vary, but ultimately, all tips are pooled together and distributed evenly.

Sometimes this model includes evenly distributing the tips with kitchen staff as well, and sometimes it does not.

Tip pooling is unpopular because it means servers earn less, and as a result, they will sometimes opt to work in establishments where they are guaranteed more and fair enough.

During the pandemic, restaurants have found creative ways of making sure their employees are fairly compensated. These have included automatic gratuities, adding COVID-19 surcharges, and also tip pooling in a way that includes the kitchen.

Tip pooling can also resolve transparency issues that can cause negative feelings between coworkers. With the right technology, such as Tiphaus, attached to their current POS systems, all staff can see the total amount of tips and their personal share.

Moving toward tip pooling utilizing technology that provides transparency is a much more democratic process for distributing tips.Tiphaus offers restaurants the technological services that can accomplish this goal and make managers’ reporting and payroll duties simpler in the process.