New York Restaurateur's Unique Pricing Strategy is Eliminating Bad Tippers

Tipping in the United States has been a standard that dates back well over a century. There is a good reason why customers do not pay for everything in one bill. Dating back to the 17th century, British aristocrats would give their servers a sprinkle of change and consider it something presented to social inferiors. Rich Americans who were vacationing in Europe after the Civil War brought the custom to the United States. Back then it was viewed as UN-American to tip, but somehow the tradition stuck and today over 4 million people make their living on those generous tips.

How Tipping Went From a Sprinkle of Change to a Means-to-an-End
When the Fair Labor Standards Act was amended in 1966, a sub-minimum wage was introduced for workers who relied on tips as part of their pay. This was a huge change for employers who were now able to offload much of their responsibility to pay their employees the legal Federal minimum wage. Today the minimum wage for tipped employees sits at $2.13 per hour, a wage that has not moved in over twenty-five years. Although in that same time the Federal minimum wage has increased six times, people relying on tips as their pay have not enjoyed such a benefit.

The Tip System May Be on the Way Out
A growing trend in the service industry is to do away with the tipping altogether. The owner of the New York based restaurant Shake Shack, Danny Meyer, is eliminating the tip paying structure and implementing a service charge into the prices of menu items at his restaurants. Meyer feels that the tipping was simply getting in the way of providing his employees meaningful career advancement opportunities. This restaurateur has felt for twenty years now that the tipping system is awkward for both customer and employee. Employees are working hard enough to please their employer, then have to deal with the added stress of being rated on their performance with each customer through the tipping process.

The All-Inclusive Pricing Could Eliminate Tipping Forever
Although not every tipped worker is struggling under the current system, not every server enjoys working in a fancy restaurant where the checks are higher and the commission is guaranteed at 20% on each sale. Meyer says that getting away from the current tipping system and incorporating a fee increase in goods allows everyone on staff to benefit. Not only will the servers be properly compensated for a challenging job, the increase in fees allows the employer to also give more to the non-tipped employees at the bottom of the pay scale. Workers like cooks, dishwashers, front house staff, and entry-level management, will all see an increase in their paychecks.

The Start of New Era in Hospitality
Although this trend towards all-inclusive pricing is just starting to gain traction in New York, small businesses around the country have already implemented this practice for years and are seeing huge benefits. In Oakland California, LaneSpitter Pizza already consider the no tipping a sustainable served business model. Employees of this pizza shop now enjoy healthcare benefits, paid time off, and even overtime pay. None of this would have been possible if the business was allowing the staff to rely on tips to survive.

While getting rid of tips altogether might seem like a huge task, it is the right thing to do to start treating all employees like they are valued staff members. Once you can look at the downside to tipping, it becomes obviously clear that a serious change is long overdue.