The hospitality industry is evolving in Washington and Oregon, as it is across the country. With recent legislation at the federal, state and city level affecting minimum wage, tip-pooling practices, sick leave and predictive scheduling, it is hard to keep up with all the new rules and terms. In order to be able to keep up with the changes in the labor market and to be able to provide health care options to our staff we need to change our model in order to compete in a tight labor market. We looked at different models, weighing the pros and cons, and landed on a service charge to ensure that our team is well compensated and continue to attract top talent while ensuring that our guests continue to receive an outstanding experience and our company is well positioned for the future.
A growing number of restauranteurs are experimenting with new ways of doing business, and there’s no one right answer. In August 2019, our restaurant moved to a 5% service charge model. The 5% service charge helps provide benefits to our top talents which includes and not limited to health insurance. Thank you for your understanding and support.
With all of the changes in the industry, there have been many explanations and terms used that can be confusing. Here are some definitions to help break it down:
Glossary of Terms:
Service Charge: A service charge is a set percentage added to every guest check. The total amount of the service charge is the property of the restaurant which helps pay for labor and benefits for all employees. The service team is paid an hourly wage and tip commission.
Gratuity: A gratuity, or tip, is money paid for service -in addition to the check. Tips are usually shared between the server, bakers and support staff, including bussers and hosts/hostesses. Hospitality Included: Some restaurants choose to raise menu prices and eliminate tips and service charge to offset the increases in labor costs.
Tip-Pooling: A valid tip pooling practice involves the collection of all tips to be put into one large “pool.” Tips are then redistributed among a larger group of employees. In theory, tip pooling ensures that all staff members are fairly compensated for their work, especially when there are multiple services being rendered and single points of payment.
Frequently Asked Questions:
In our current tipping model, do servers keep all their tips?
No. Server keep 75% of the tip and 25% of the tip amount is distributed between the servers, bakers, and support staff including bussers and hosts/hostesses..
How are employees compensated in a service charge model?
Each member of the service team is paid an hourly wage and a tip percentage.
Are service charges considered wages, tips, or a benefit for employees?
A service charge is the property of the restaurant and the restaurant then pays hourly rates and tips to employees which are subject to wage-related taxes, and are reported by the employer to the IRS.
What are the benefits of a service charge model?
Employees: We mainly use the service charge to provide health insurance to our employees. Our team is made up of professionals who have made hospitality their career -they have families, are homeowners, and active members of their community. The service charge model, combined with the ability for guests to leave additional gratuity for excellent service, ensures a sustainable model for our team to continue to receive excellent compensation and benefits.