Comment of the Day: “Ethics Quiz: The Tip-Sharing Plan”

We have a rare Ethics Alarms Quote of the Day hand-off. Responding to the ethics quiz about the ethics of tip-sharing,  veteran commenter JutGory wrote,

“My understanding is that, in some places, servers collect the tips and “tip-out” to the others (kitchen staff, etc.) at certain rates. If that is the culture (I have never been a server; not my skill set), why is a server trusted more than the employer to be fairer than the employer in tipping out?”

I have written about tipping ethics issues for years, and never encountered the concept of “tipping out,” perhaps because the minimum wage jobs I had in my youth never involved tips of any kind. Still Spartan picked up JutGory’s baton and dashed for the finish line. Here is her Comment of the Day on the post, Ethics Quiz: The Tip-Sharing Plan: 

I used to work at a fancy restaurant and that was the system. The percentage of tip out was based on total food sales, so you couldn’t cheat. And, if I received really generous tips, I was incentivized to tip more because I wanted the hostess to seat good customers at my table, my drinks up first, my tables bussed quickly, etc. I would never work at a place that pooled tips because I was quite frankly better than most servers. I was quick, friendly, and rarely made a mistake. I could up-sell my customers on liquor and food which meant more money for me at the end of the night. And you people think I am anti-capitalist! Chefs aren’t tipped and they make a lot more than $3/hr., and although it is a hard job, at least their revenue is consistent. Many managers are well-paid too and often double as hosts or bartenders. I would be pissed if they had the ability to collect my tips.

The real solution to this problem is to pay servers a living wage and just have it incorporated into the price of food.

22 Comments

Filed under Business & Commercial, Comment of the Day, Ethics Alarms Award Nominee, Finance, Government & Politics, Workplace

22 responses to “Comment of the Day: “Ethics Quiz: The Tip-Sharing Plan”

    • JutGory

      Thanks. Though I have to note that I could not write TWO coherent sentences there. There! Even this comment has more sentences, yet lacks the awkward structure and hapless redundancy of the second sentence of my earlier comment. Anyway, a good reason not to compose commentary on one’s phone.
      -Jut

  1. Great comment from both. I believe Spartan worked in more ‘upscale’ establishments than those my contacts have, and thus had a different experience.

    • Yes, I don’t think out-tipping works at a greasy spoon.

    • Luke G

      I worked at a college bar- low rent by absolute standards, a decent place by college bar standards. Their method was pooling all tips and then averaging by the hour before tipping a percentage out. Like if they got $800 in tips over an 8 hour shift, and the security tip out was 5%, then the total security tip out was $40 And my share prorated on my number of hours worked.

      A system designed to eliminate chaos and favoritism in tipping, which would probably have worked except to this day I suspect it was just deliberately convoluted to allow the owner to skim.

  2. So why do not restaurants pay servers a living wage?

    • Still Spartan

      There’s no incentive for restaurants to do so. Right now, the system requires the patrons to subsidize wages, so why take that on? Patrons would rather pay for a $30 piece of salmon at Restaurant A compared to a $36 piece of salmon at Restaurant B where a living wage is paid. Everyone would have to get on board to make this work. Plus, a wage hike would affect overtime and benefits (if there is a workplace injury).

      • Can you cite an actual instance of that minute level of price shopping BETWEEN restaurants?

        I mean, anecdotally, and what I feel is common sense is that most people pick restaurants based on places they already know they like or places based on what “style” of food they currently feel. Then I think most people are already price-set into certain ‘levels’ of restaurants, where similar dishes are going to be sold with vastly larger price differences than $6.

        THEN, I think once inside a restaurant, people have a general notion of how much they can spend on a particular meal…at least those who are in the pay-range that compels that kind of budgeting…and based on that general notion, they peruse menu items that optimize their taste and budget. But at that point the server’s base wage will not change based on what a buyer buys.

        That being said, let’s say there legitimately are two restaurants in town that have exactly the same dish for a $6 difference. I would submit, most people, when they align their values to select between the two restaurants are going to place higher priority on things like “I’ve been here before and like it more”, “I like the look of the place better”, “I like the atmosphere of the place better”, “I like the variety offered”, “The food is known to be better here”, on down until eventually they say “The salmon costs less here”.

        Odds are, the place that pays its servers better is going to have better servers and odds are the “I get treated better at this place” ranks higher on the list of values than “The salmon saves me more money here”.

        But I don’t even think the hypothetical raises its head in reality. People don’t evaluate restaurants purely on price when price is that close together.

        • Still Spartan

          I am not an expert in running a restaurant, but I can see customers drawing those comparisons. So, I eat out a lot in DC on my expense account and many if those outings are at steak houses. We have a lot of them in DC, and if you put me in a blind taste test, I couldn’t tell Morton’s filet mignon from a Ruth’s Chris filet mignon. I could tell you that Capital Grille has a better ambiance, and that Charlie Palmer has better service, but really at this level, a steak is a steak is a steak. Last year, my husband wanted to go to a steak house for his birthday, and I picked Del Frisco’s solely on the basis that I had the most loyalty points there, so our meal was almost free.

          I want restaurants to abolish tipping, but I do think it will only work if a large percentage decide to do it. But I don’t see it happening. Restaurants have busy nights and slow nights. On a slow night, a restaurant could take a loss if sales are low. There also could be an overtime problem. In my waitressing days, I easily worked over 40 hours a week. At nicer hotels, servers might even have multiple shifts on the same day. Plus, there are worker’s compensation issues if someone gets injured — which happens a lot.

          Given how volatile this industry is, I can’t see restaurants wanting to take on this extra risk — but it certainly would be good for the workers. To be honest, I wouldn’t have been a server if I had been paid a flat wage. That job was physically demanding and had awful hours — I usually worked 4 to midnight. I did it for the money. If I had received a flat fee, I would have done something more interesting and didn’t involve throbbing feet at the end of each day. But that is just how I am wired. I am sure others would appreciate the security of knowing what their paycheck will be each month.

    • Arthur in Maine

      Define “living wage.”

      Let me offer another angle or two on this. I used to cook professionally, trained in Europe, and worked both there and stateside in houses ranging from mediocre to excellent.

      Let me start by noting that I’m a big fan of tipping in restaurants. It is one of the only areas of commerce in which I regularly engage in which I have a say in the value of the product or service I have purchased. *I* get to determine how much to spend on an aspect of my meal was worth. I can’t negotiate for the price of the salmon, but I can reward – or make a clear statement of displeasure – by the amount I tip. Tipping out bartenders and busboys helps a server do a better job for me, the customer.

      My default is 20 percent. I’ll go higher if the service is really good (in fact, I usually go higher if I’m eating at a breakfast or lunch joint where the check averages are low). If I’m dissatisfied with the service, I’ll go as low as ten percent – but I’ll make sure the server knows why. And I know enough about how food service works such that I never punish a server when the problem clearly originated in the kitchen; the server will still get the tip he or she deserves, but I’ll make sure they (and/or the manager) is aware of my displeasure with the food.

      Being a server is usually a physically and mentally demanding job. However, in most restaurants, it’s really hard (for me, anyway) to consider it as much beyond a semi-skilled job. And it can be a remarkably well-paying one, all things considered; if you ever saw it from the inside, you’d know that servers typically work about half the number of hours that the kitchen staff does, and if you’re talking a mid-level or better the servers will typically take home considerably more each night than anyone in the kitchen, with the possible exception of the head chef.

      Obviously, that’s not the case at your average Denny’s or Waffle House, and I recognize that some people, for reasons of geography, may not have better options available to them. Even so, tipping under a conventional system incentivizes servers to make sure customers get prompt attention and a good experience. I have no problem with the idea that they tip out other members of the service staff to make sure those things happen. I DO have a problem with tip POOLING, in which all tips go into a common pot and then get split. That removes the incentives tipping should produce in the first place.

    • dragin_dragon

      Minimum wage law exempts them.

  3. I take students to Ireland biennially, and I travel to England not infrequently, so I try to stay current with things like tipping standards for restaurants, taxis, etc. My favorite comment appeared on an English website about Irish customs… saying that whereas tipping isn’t necessary in Ireland, the minimum wage for Irish waitstaff is “only” €8.65 (currently about $10.70) an hour, “so they welcome tips.” (U.S. minimum wage for waiters is $2.13.)
    Sigh.

    • Joe Fowler

      Curmie, the minimum wage varies by state quite a bit. It is just possible, in a few States, to receive the Federally mandated minimum of $2.13 for work where one also earns tips. Most States do not allow this. In my State, Washington the minimum wage is $11.50, with no reduction allowed for receiving tips.
      U.S. minimum wage applies to Federal contracts and related work covered by the Fair Labor Standards Act, currently $7.25 ($2.13 for tipped work, and tips MUST bring the total to at least the State minimum wage; tips in excess of this belong only to the worker); not all work is covered by this. Some States simply fix their minimum wage to this, but many do not. 29 States, as well as Guam and D.C. have higher minimum wages than the FLSA standard, Moreover, there are some 40 counties and cities within the various States that require higher minimum wages than their own State’s mandate.
      In short, it’s a pretty complex patchwork, varying greatly from region to region. It is misleading, although perhaps technically accurate, to say that “U.S. minimum wage for waiters is $2.13”, because so few waiters are actually having their wages set by it, and in any case their compensation MUST at least be the local minimum wage including tips.

  4. Other Bill

    A worthwhile topic well discussed and commented upon by people with actual first hand knowledge. Thank you.

    And no one mentioned “TRUMP!!!”

    Amazin’.

  5. Pennagain

    The restaurant I frequent most often tips out. (they call it tip-sharing). They are relatively small (seating under 50). They’re usually heaviest for breakfast and brunch; on weekends and holidays for dinner and late night. The system of tipping out must work very well because everyone is satisfied with it. Perhaps it is due to the relatively small size and overlapping staff duties — server staff exceeds four for weekend brunches or on special occasions (the usual is two or three) who will bus their own tables or act as cashiers when the single busser/cashier is stuck at one job or another. Whoever is nearest the front door greets incomers and depending on the seating either invites them to seat themselves or gives them an approximate waiting time and a place in line. This takes a couple of seconds of time and adds to the friendliness and informal ambience the restaurant. Another aspect of is that the owners come in when necessary and take on whatever tasks are wanted. The kitchens are usually staffed by a chef, an under-cook and an assistant. Servers plate the salads and often prep the starters or cold dishes.

    Tips are portioned out on a percentage basis to everyone except owners and head-chef — I forget the split, but it always stays the same for the servers, the rest is divided among those backstage; of course, the busier the server, the bigger the tips to go round. “Regulars” get served well, regardless: volume exceeds big tips. Orders “to go” go into servers’ tip jars on a rotation basis. The totals are made at the end of shifts. Each person is responsible for the tax on his or her total added to salary. The owners hand out birthday bonuses, always treat visiting family to a free meal, and close for an evening or two during the year to throw a private fundraiser for an ailing former staff member or an engagement/wedding/baby party for a current one.

    The restaurant retains its key staff, the servers — I have known one of them since 1985 – he has introduced me to an uncountable amount of new foods, spices and sauces over the years. Two others – a husband/wife team have been in their places for more than 20. They moonlight as professional musicians and the four paychecks + tips mean a good life for them. The non-serving staff come and go, mostly depending on the state of their educations. They don’t necessarily come to work intending to get GEDs or get a degree of one kind or another, but there is always at least one enthused example to follow. So they hoard their tips, and work their asses off on weekends, holidays and “vacation” times, sometimes taking a semester off here and there to accumulate the tuition for the next. These are young people who hated school. Now they discover that if they can get high school behind them, they can go in any direction they want to and that makes a hell of a difference. Eventually, they bicycle off into the sunset, usually having left a newbie behind with a personal reference. It’s a good deal all round for as many as five servers and four or five in the lower salary brackets. And it begins and ends with the tip sharing. Would it work with different owners, a larger size, no established customs?

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