Unless you work in a restaurant, you may not have noticed that many restaurants no longer include “automatic gratuities” on the checks of large groups. But if you do work in a restaurant, this little change may have left you financially destroyed.
Adding a mandatory tip to the checks of large parties was once standard practice in the restaurant business. It ensured that servers who worked on large groups wouldn’t end up getting screwed out of a proper tip percentage. (Tip percentage often goes down as the size of the bill goes up, thanks to human nature and greed.) A rule change by the IRS that took effect in 2014, though, mandated that restaurants treat these automatic gratuities as regular salary and deduct payroll, Social Security, and other taxes from them. Restaurants saw this as a massive new accounting headache. In turn, many of them simply did away with automatic gratuities altogether. Now, many checks carry printed “suggested tip” guidelines for customers, but those tips are no longer added onto the bill automatically.
The end of auto-gratuities happened to benefit restaurants, including many large chain restaurant companies. For workers, it was bad news. Virtually since the change was made, servers have been complaining that it hurts their earnings by allowing large groups—which can monopolize the attention of servers for a whole shift—to skimp on tips, leaving them well short of what they would earn in a normal night serving many different tables.
How bad could the damage really be? In the context of a restaurant employee’s take-home pay, very bad. Coworker.org, a website that allows workers to build online campaigns and petitions, is currently home to petitions on this very topic from employees of at least eight separate major restaurant chains, including TGI Friday’s, Cheesecake Factory, and Darden Restaurants. The petitions, which collectively boast thousands of signatures from employees, all call on the restaurants to bring back automatic gratuities on the checks of large parties. Workers say that the end of the practice is killing them financially, thanks to stingy tipping on large checks that can often average 10% or less.
Coworker surveyed nearly 150 servers in across the country about the effect of the end of auto-gratuities. Their findings:
The majority of servers at major restaurant chains say they’re losing between $50 and $200 per week as a direct result of not having automatic gratuities added to the checks of large parties. In a field where even full time workers might pull down less than $2,000 per month, that is an enormous hit.
It is hard to imagine that this is what the IRS wanted to happen. It is equally hard to imagine that some of America’s biggest restaurant companies cannot manage their own accounting well enough to reintroduce automatic gratuities, so that their valuable employees do not plunge even deeper into poverty.
In the meantime, be sure that you leave a decent tip.