Covid Might Change How Restaurants Tip Out Their Workers
Doubtlessly COVID-19 has changed the foodservice industry’s landscape since it took over everyone’s lives last March. As case numbers rise and fall, and legal policies surrounding restaurants and public safety evolve in response, employees in one of the country’s biggest industries are concerned about a steady paycheck. COVID-19 has left many unemployed, with restaurants and bars accounting for 25% of lost jobs during the height of the pandemic.
Previous to this “new normal,” tipping was a regular practice at almost any restaurant. The federal tipped minimum wage allows businesses to pay their employees $2.13/hr as long as their monthly tips make up at least the difference that they would earn under regular minimum wage in their state. With the added emotional stress of the pandemic, lost hours and jobs, financial difficulties, and reduced capacity regulations, servers are starting to come together and collectively say: Tips alone just aren’t meeting the cost of living nowadays the age of this management model might be over.
The Death of Tipping
Appropriate staff payment models have been a hot-button issue for years. Many waiters have reported that they don’t take home enough at the end of the day, which is why employee turnover is so high in the hospitality industry.
At the beginning of 2020, tips increased on average. People initially thought that the pandemic would be a short-term issue and thus gave more than usual in the spring, feeling for the financial difficulties that restaurants and their employees were going through at the time, aware that the shift to takeout and delivery hit everyone hard. Now, so many months in, customers are struggling with money and can’t afford to pay restaurants’ employees for them.
Part of the issue is that food service workers are having trouble getting their jobs back, and when they do, they get limited hours. Restaurants are closing en masse because of decreased profits (a result of losing dine-in service) and little government intervention, and those that remain open do so for limited hours. Half of the restaurant employees who went back to work report getting scheduled for ten or fewer hours each week. Meanwhile, when they get shifts, employees have to contend with health and safety concerns on the job and enforce most of the COVID-19 regulations themselves, dealing with customers who don’t want to follow mask rules and potentially put their wellness at risk.
Most of the time, though, it boils down to the fact that customers simply aren’t pouring into dine-in like they used to. They’re not comfortable sitting in a public, enclosed space for a long time—but servers don’t benefit from tips spent on takeout and delivery orders. Since COVID-19 began, 65% of service workers say their tips have been cut in two. Nearly half say they’ve lost the majority of their tips because of this pandemic. As the winter months close outdoor seating options (one of the last vestiges of dine-in services), it may be time to revisit whether tipping remains a viable business model at all.
When tipping just isn’t working anymore, you can take care of your employees by pivoting to a better option, such as…
Raising base pay and eliminating tips. When you raise menu prices to reflect a living wage, gratuity-free models make more sense. Some places are already instituting covid surcharges; for example, in New York City, they’ve increased each bill by 10%. You can also raise prices and put the additional revenue toward payroll, although it’s best to be honest and transparent with guests about why their prices are rising so you don’t get as many complaints about the higher costs.
Changing your current tip system. For example, suppose your servers usually take home all their tips, but money’s tight because of new state policies or sanitation procedures. In that case, you might consider switching to a tip pooling structure so waitstaff, delivery couriers, back of house, and the whole team gets a cut of some or all of the night’s tips. Whatever tipping structure you use should motivate your entire team to work together and sell more rather than causing additional tension.
Talking to your employees. As the ones working the floor every day and chatting with your best customers face-to-face, your servers will have strong opinions on which tipping model most effectively encourages productivity. Some servers and bartenders prefer tips to a salary so they can take home their cash at the end of each night; some would much rather have a steady paycheck, so they can manage their monthly budgets. It all depends on personal experience and expectations, so reach out and communicate openly with your staff. Establishing an honest back and forth is the foundation of robust work environments.
At eatOS, we power technology that’s designed to help you make safer, more profitable business decisions. From real-time reporting features that make budgeting a breeze to an easy-to-learn interface for smooth delivery integration, your customers will appreciate the versatility of faster service. At the same time, employees benefit from easier tipping—if you choose to stick out the model after all.
You might find you have the finances you need to pay a living, base wage to all of your servers when you invest with eatOS. Our superior management software seamlessly opens online ordering revenue streams, where you keep all the tips: No more paying out towering third-party commission fees. With more profit in your pocket, you can offer competitive salaries to draw in the best of the best candidates. Greater rewards entice more productive workers to your payroll.
When it comes down to it, the pandemic has changed how we approach every aspect of running a restaurant. Servers need sustainable, living wages. Customers need affordable, safe dining options, and they’re less able than usual to pay more in tips when employees deserve it. It would help if you maximized revenue, mainly when sales are thin all over the country.
eatOS is the answer. Schedule a demo with us today and see firsthand how we’ll help your team collaborate more efficiently, streamline overall operations and automatically calculate tips and paychecks no matter what tipping model you ultimately structure inside your restaurant. Restaurant management just got made simple.