Fair vs Fair: Ethics and the “No-Tip” Restaurant

You know, this looks like a place that would believe that dishwashers deserve as much pay as waiters...or as bankers, for that matter.

You know, this looks like a place that would believe that dishwashers deserve as much pay as waiters…or as bankers, for that matter.

William Street Common is a new restaurant in Philadelphia, and is getting publicity for, we are told, experimenting with a different and (maybe?) fairer compensation model. Owner Avram Hornik  pays all of its employees, from the servers to the dishwashers, at least $15 an hour plus paid sick leave and health insurance benefits. There is a 20 percent service charge for drinks, and that goes into a common fund that makes that  $15 an hour wage affordable. Money left over at the end of a pay period is divided up among employees based on a point system related to various factors.

Hornik came up with this structure, he says, to deal with the well-debated problems of tipping. “Some people just tip the same amount, but some people base it on how quickly the food was there, whether we were out of something, whether the server was there when they wanted them to be,” he says. “So much of that is out of the control of the individual server… So why would it be fair for the service employee to be responsible for the poor decisions of management?”

Hornik argues that his model “essentially creates a guaranteed floor. But we’re also capping the ceiling,” he points out, because the tipping gets shared equally with all employees. “We didn’t think it was fair [that] in some places you have dishwashers earning 10 dollars an hour and the bartender earning 30 dollars an hour.” He also is convinced that the customers will benefit.  “That atmosphere among the employees, a sense of community and empowerment and happiness with the job, is going to translate into a better environment for customers,” he said. “By having happy staff customers are going to be happier too.”

Is this system really fairer than the current one? Progressives are cheering it, because it represents a “living wage,” or at least something close to it. OK, but it would be nice not to feel hyped: ThinkProgress, for example, had headlines that the William Street Common “got rid of tipping” and writes “tips aren’t mandatory.”

Inept reporting or lies, take your pick. A 20% “service charge” is a mandatory tip, so tips ARE mandatory. The reports don’t explain how voluntary tipping has been eliminated, or whether a server would be prohibited from keeping a ten-dollar bill that a diner hands him, saying, “You know, the food was lousy, but you were so gracious and accommodating that you single-handedly made the evening bearable. Thank you. If I ever come back, it will be because of you.” If so, is that fair?  I don’t think so. In fact, it’s exactly as unfair as a diner not rewarding excellent service, and tipping a dime.

As far as I can see, the owner’s plan embraces socialist/communist versions of fairness over core American values. Why is it fair that a dishwasher should get the same salary as a server? Karl Marx thought it was fair; I don’t.  Anyone with hands can wash dishes. Serving requires interpersonal skills, training, quick thinking, problem solving, in short: ability and even talent. It’s not fair to reward that? It’s not fair to give employees an incentive to develop those abilities? It’s not fair for those who don’t want to work hard enough to develop such skills to be compensated less than those that do?

In bolstering Karl Hornik’s claim that his system is fairer than merit-based tipping, ThinkProgress helpfully points out that studies show that such factors as attractiveness and race affect tipping. I bet hygiene and manner have an effect too. Yes, it’s true: biases inevitably come into play along with freedom and choice, and progressives like Hornik will take away those choices to avoid bias every time. If I prefer to have my food served by an attractive server with a pleasing voice and pleasant manner, well, how unfair of me, and how unfair if he or she is able to profit from the benefits of good genes, a fortuitous upbringing, and maybe some hard work. The United States culture hasn’t and shouldn’t adopt this version of fairness.

I strive to help build a society in which everyone does their best to be exemplary at their jobs whether they are compensated for it or not, but capitalism holds that most people need to see something in it for them, and that’s the way of the species, more the pity. I doubt that Hornik’s (okay, he’s Avram, not Karl) formula is going to result in happier servers and good service, but I wish him luck.

When I go to a hotel and order room service, I usually don’t tip the server because there is a mandatory 20-25% service charge that given the obscene mark-up on the food, is already generous. Nonetheless, in pursuit of the voluntary tip, those servers usually act like Jeeves in a Wodehouse novel, and sometimes, if it’s early enough and I am impressed with the server’s manner, I will add something to the bill. If, however, the 20-25% were not going to that server, and if I were not allowed to reward exemplary service, do you think the server would be begging to pour my coffee? Do you think she would be happier, knowing that it made no difference how well-groomed, pleasant or fit she was, I couldn’t show that she brightened my 6 AM meal away from home by rewarding her hospitality skills even if I wanted to?

I don’t. I don’t think Hornik’s way is fair, just a different sort of unfair, and one that will lead to happy dishwashers, and crummy service.

But I hope I’m wrong, William Street Common.

The market will decide.

______________________

Pointer: Fred

Sources: ThinkProgress

17 thoughts on “Fair vs Fair: Ethics and the “No-Tip” Restaurant

  1. A tip, or gratuity to be more correct, is defined and designed as something given voluntarily or beyond obligation usually for some service performed. The current pay structure for restaurant staff makes the gratuity crucial for the individual worker to qualify as an employee and not a slave. They need to be paid a minimum wage like everyone else in the country and the potential for gratuity to be their motivating factor to rise above average and go beyond. Under the current structure the owner / manager is skirting their responsibility to pay a decent wage for services rendered by being allowed to consider the tip as part of their basic monetary compensation package. The tip has become a subsidy paid by the customer that supports the owners greed and not being used for its original intent and design. Restore the tip to its rightful position in the equation as above and beyond and make the business owners pay the wage that we as a society has decided is fair in the first place and your problem will be solved.

    • Well, yes, we know that, and it’s been discussed here often. Right: even lousy servers should have a base salary that meets the minimum wage. But take away the voluntary tip, and direct that every server must be compensated in every respect exactly like any other, and there is no incentive besides good will to work hard and please the customer.

      • It’s not just good will. Plenty of businesses provide good customer service without using a tipping model by having managers supervise the front-line customer service employees. It works just fine for retail clerks, banks, cafeterias, and fast food. Whether you can run a sit-down restaurant that way is a real question. He might have found a way to make it work.

    • In Connecticut (and presumably elsewhere), an employer must make up any difference between tips received and and average of minimum wage for all hours worked. There is thus no “subsidizing” employer greed, per se. The system theoretically allows the waitstaff to earn significantly more than minimum; however a mixture of good and poor hours may negate this.

      Hornik’s system takes the risk to the waitstaff out of the economic equation. Capitalism is all about risk management; here the owner assumes more risk himself, with the potential reward of a less stressed staff that performs better. To describe this as “socialist” is unfair. While he is paying a higher base salary, he also has a “point system” that presumably awards merit.

      The dishwasher, for instance, does not necessarily get paid as well as the bartender; but the dishwasher is not collecting food stamps while the bartender is collecting the tips. Now it is true that “trained monkey” could wash dishes all night long without pay, but even the monkey has a cost associated with the training. Hornik’s model might be comparable to Henry Ford doubling his employees wages, even the low skilled ones. Moral improved and turnover dropped, dramatically improving productivity and Ford’s bottom line; Hornik is hoping for a similar turnover.

      The sharing of tips is even logical according to the tipping model, which is meant to spread the risk of the restaurant business to the employees. As the bartender won’t get any tips without clean glassware, part his tips supports his “support staff”. Why should the owner pay all the wages of the dish attendant, but the bar keeper keep all the reward? Many other restaurants already split tips with the backroom staff.

      Now, why a mandatory “tip?” There is a social and economic reason. The social one is simply to clue in customers reflexively inclined to “tip” that the service is already built into the price. Now the “service charge” could be hidden within the price, but that a trivial mathematical detail. The economic reason the staff get a cut of the sales is to expose them to the success of the restaurant; if sales go up, their pay gets a bump. If sales go up, everyone’s workload increases, and everyone is rewarded for working their best contribution; even the dish room attendant cleaning up twice as many dishes on a busy night.

      A true Marxist model pays the same regardless of output. The business model here seems to reward productivity, while reducing the risk to the waitstaff. The model guarantees a hirer base wage, at a trade off of a smaller potential cut of the sales. The tipping model evolved under certain economic conditions to become the dominant system. It would be naive to assume that economic conditions never change, and anti-capitalist to not try different models to attempt to gain a competitive edge. Thus even though “Marxist” leaning pundits may applaud Hornik’s model, it does still seem to fall squarely within the realm of dynamic American capitalism.

      • You’re making a lot of assumptions about the point system. He flagged experience. I suspect that none of the points are based on anything so bourgeois as ability or productivity, but rather “objective’ standards…if not, why didn’t he highlight those? I could be wrong. But I don’t see anything in the reports to show it.

        If the service charge doesn’t go to the server, then it is misleading. And how is anyone other than the customer supposed to know who is a superlative server? In most establishments, the best waiter is the one who gets the most tips.

        • >>“We’re projecting, based on our budgeting and depending on the employee, between three to ten dollars an hour in addition from that bonus pool,”

          Presumably, waitstaff get the higher base, others the lower. Dependable employees also appear to get a bump (non-dependable presumably get the door, unless he truly is a Marxist). Now in the event of poor performance, everyone makes the same (higher than) minimum wage.

          As I already stated, tip sharing is already common, so “service charge” here is not misleading. This is also not an “everybody does it” rationalization, because it is not inherently unethical to pool tips. The article is also silent on whether voluntary additional tips must be refused, so no judgement can be rendered here.

          I won’t claim this system makes the owner an ethics hero. It is merely a business model that he hopes will be profitable. It is ultimately moral luck whether he succeeds or not. If he follows through, he would avoid the dunce status of owners who don’t make up the difference when tips don’t cover the employee’s wages. Such cheating is not solved by changing business models, however, as it is only very indirect consequence of the tipping model; enforcement and penalties for non-compliance are the true immediate solution. Changing to a different model merely a business decision.

  2. I like that he’s trying something new. The skills of the employees are transferable to any number of other establishments. If it fails, he’ll know because employees will tell him or walk. If it succeeds, he’ll look like a genius. I think the part about the point system got overlooked. The 20% on Drinks that rounds out the base pay is more than enough and the remainder of the money is unequally distributed based on points. Presumably, this is where Bartenders wield greater points than dishwashers and collect the increased compensation.

    • It would seem to me that the fairest way to handle a points&spool system is for ALL tips to go into a pool. Then each eater, as part of their meal, fills out a customer satisfaction survey to an anonymous box or whatever.

      The satisfaction survey would be the source of “points”. At the end of a tracking period, let’s say a Hypothetical $10,000 of tips have accumulated. After tallying up ALL the waiter’s satisfaction surveys, the tips are divvied up proportionally.

      Let’s say Johnny Friendlysmile gets an overall 750 points and Freddy Jerkwad only garner 250 points on all his satisfaction surveys.
      Divvied up, $7,500 of tips go to Johnny and $2,500 of tips go to Freddy.

      Of course that system has flaws as we’ll, but ideally large volume will statistically correct errors. And the flip side is, managers have a solid set of documentation from which to conduct professional counseling for training purposes.

      • But I do share initial qualms with this guy’s plan. without knowing the intricacies of the point system, it would seem that Shlubknuckle’s weight gets carried by an industrious and friendly worker…

        Additionally, the direct tip from a customer straight to the worker is about as direct a free market motivator as there is.

      • Yeah, I mean – it’s an experiment right? The guy is forthright in explaining it to his employees and his employees didn’t walk out then and there – so they’re open to it. I would imagine in an environment where this guy is on the hook for a radical experiment and he’s well aware that it could not work out, open dialogues and feedback are probably welcome. With that kind of feedback from the willing workforce, you’d have to assume that whatever point system he’s got going is either working or being continuously adjusted so that it is fair. Of course – the other point of flexibility is in the hourly wage. Everyone makes a minimum of $15 so that doesn’t preclude bartenders from having a higher starting wage of $18 or $23/hr.

        I also thought it was interesting that the 20% was only on Drinks – probably the highest margin item available on any menu. Dinners who don’t drink pay less – which has always been true – but extra accurate for this establishment now.

  3. It will certainly be an interesting experiment. I’d like to point out a few things that could make it a better plan than what exists at some eateries.

    1. When I was a bartender in college, wait staff were required to give bartenders 10 percent of their tips because we poured their beer and wine and mixed their drinks. Bartenders always made much more in tips than wait staff (plus our hourly wage was higher), even though the job of waitstaff was physically more demanding and included busing tables and bringing all dirty dishes to the kitchen.

    2. As a teenager in high school, I was a dishwasher at an Italian restaurant. My job included busing tables, setting clean tables, and bringing all dirty dishes to the kitchen, as well as washing all of the dishes. In that role, I didn’t receive any percentage of wait staff tips, but in some restaurants those individuals do receive additional compensation.

    3. As a waitress, there were many ways in which my compensation varied widely. Always, my hourly pay was well below minimum wage (typically around $2/hour). In most places, I relied on tips left as cash on tables to augment my income. In one place, a private country club, gratuity (15%) was always attached to the check, which members would sign (they were billed at the end of each month). There were days that I would wait on ladies all day, bringing them pitchers of free water with LOTS of lemons (think free lemonade) and cleaning up after them (with snacks they brought from home) and wouldn’t receive a dime in gratuity because they generated no check.

    4. As a bartender, on busy nights when there was more than one of us, we would pool our money and each bartender received their share based on how many hours each worked. The head bartender (who was also the manager and received higher hourly compensation than the rest of us) would always be in a few hours early (not tending bar) and would count those hours when calculating tips, thus he always made the most. (eg. $700 total tips, 3 bartenders, two work 7.5 hours, one works 10 hours= $28 in tips per hour for each bartender).

    5. Those who make cash tips NEVER claim what they actually get, leaving non-tipped restaurant workers paying full taxes and tipped workers paying a portion of the taxes they owe.

    My main point is that with so many different ways for compensation to be configured, Hornik’s system has more merits than others, especially considering he offers sick leave and insurance.

  4. Free market principals would, essentially, put the ability to increase the income of a server squarely in the court of the consumer, not on management. I love that, and do not wish to see it go away. If Tex’s Freddy Jerkwad happens to wait on my table, I am going to express my dissatisfaction with a $.25 tip. Might be motivation for him to clean up his act.

  5. Systems like this make me roll my eyes. A 20% service charge? Why make it that complicated? Just raise your prices. You don’t want to do that? Why not? Because you don’t want to be more expensive than you r competitors? But you are. It’s fundamentally dishonest.

  6. That’s a really interesting topic. Like you said, lousy servers still deserve to be paid. But, what if you didn’t have any lousy servers? I’d like my restaurant to reach that point. It’d be awesome if I knew that I could depend on all of them. Maybe if I look into a training program, that’ll help my employees. I would suggest that you do the same!

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