(NEXSTAR) – It’s widely believed that those who work in the restaurant industry generally earn less than the rest of us, largely because they’re tipped. But, as many have argued, paying a server the federal minimum wage for a tipped employee, coupled with the tips they receive, is sometimes not enough to meet the standard minimum wage of $7.25. This is causing some restaurants to switch to a no-tip style of commerce.
Running federal regulations requiring tipped employees — those who receive more than $30 in tips each month — to be paid a minimum wage of $2.13. This server then owes an average of $5.12 in tips per hour, which means he would earn the federal minimum wage of $7.25. If a server doesn’t earn enough tips in a shift to earn $7.25 an hour, federal law dictates that the employer must pay the server the remainder to meet that rate.
While this may differ for some states, others follow this federal minimum requirement, including Indiana, where a business owner has decided to no longer accept tips.
Last year, Kurtis Cummings, founder and president of Switchyard Brewing Company, decided to eliminate tips at his craft brewery in Bloomington, Indiana. In place, Starting position employees are now paid at least $15 an hour.
“It’s the employer’s responsibility to pay their employees, not the customers,” Cummings told Nexstar. He also noted how factors such as the server’s gender or age, weather, or day of the week can impact how much — or how little — a server tips.
Researchers have even found that the vast majority of people don’t base the tip they leave on the quality of service, they’re actually fair. following a social norm. And when it comes to service quality, Cummings said not every problem you have should be solved on server revenue.
“It’s even more than likely the company’s fault because it’s the company’s job to train, isn’t it?” he explained. Also, the promise of a tip does not always guarantee good service. What does ? Like any job without tips, it’s job security, according to Cummings.
Cummings said Switchyard’s move to no-tip “has become a real job attractor.” Staff no longer have to worry about missing a weekend shift – shifts that are usually busier, meaning the chance to get more tips – and the company can offer other perks like paid holidays.
While Cummings employees and most of their customers have embraced the idea of no longer tipping, not everyone agrees.
Cummings explained that after Switchyard transitioned to its new no-tipping policy, some people — including many from outside Indiana — began leaving Google one-star reviews for the company. It’s a relatively common trend, Mike Lynn, professor of consumer behavior and marketing at Cornell University, says Nexstar’s KTLA.
Whether a restaurant adds a service charge or raises menu prices slightly, as Switchyard did, Lynn says businesses will likely see their online ratings drop.
“It turns out that when customers rate restaurant prices, they pretty much look at menu prices, and that’s it,” Lynn said. “We reject, or somehow discount, the fact that you are expected to tip.”
Switchyard has been tip-free for over a year. Some, like Triptych Brewing in Savoy, Illinois, are just joining the movement, while others, like Brewing of optimism (which inspired Cummings) in Seattle and Zazie in San Fransisco have been tipless for years.