Eliminating the tip credit would help servers

Posted 4.21.2018

Eliminating the tip credit would likely hurt tipped employees as opposed to helping them. When faced with higher labor costs related to the elimination of the tip credit, a restaurateur will have three difficult choices: reduce the number of tipped employees, eliminate tipping and institute a flat wage, or raise prices. Raising prices is the least attractive due to price competition with others in food service (both other restaurants and grocery stores) and will likely reduce the number of customers for the restaurant. Reducing the number of tipped employees is more likely but can impact service and the customer experience. Finally, eliminating tipping and instituting a flat wage will reduce a tipped employee’s earning potential. Some restaurants have voluntarily experimenting with eliminating tipping and instituting a flat wage, but many have gone back to the tipping model because many of the best employees left when their earning potential went down. None of these three scenarios would be beneficial to tipped employees.

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