Association for Public Policy Analysis & Management

The Seattle restaurant industry has grown significantly in the past decade, and remains a high demand industry for our region. Two recent notable policy changes have created an opportunity for impacts on service workers: first, all businesses with tipped workers will reach a $15 an hour minimum wage by 2021. Seattle introduced a tip credit to allow employers to use a portion of tips to meet their minimum wage requirements (this credit will end in 2021). In addition, the Department of Labor has created new guidelines on ownership of tips and tip-pooling. Tip-pooling practices are common in the industry, and are critical issue for restaurant workers, as they have impacts on take home pay and volatility of earnings.

One strategy to adapt in this environment has been to use service charges as an alternative or addition to a traditional model of tipping. We report on a qualitative study of front of house and back of house restaurant workers, comparing the experiences of those who work in traditional tipping versus service charge environments. Three themes emerged.

First, a traditional model of tipping seems to be more beneficial for front of house workers. Front of house workers may work fewer hours at lower wages but often receive the equivalent of their hourly wage in tips. Back of house workers more often seem to receive regular and/or full time shifts at slightly higher wages with either no tips, a percent of food sales (i.e. 3% of sales), or some amount of “tip-out” as perceived appropriate by servers and bartenders. Sentiments about tipping and service charges varied. Beyond acting as a wage boost, study participants frequently offered complex narratives about the perceived sense of control tipping allows in the relationship with customers regarding both level of service and appreciation, the relationship among co-workers such as punishment or reward for smooth kitchen service, over their feeling of success via total tips in a shift. Service charges might remove that element of perceived control.

Second, the method of implementing and communicating policies or policy changes to workers seems to be connected to worker sentiment about these policies. Staff more often seem to appreciate policy explained clearly upon hire (whether tipping or service charge) or when a change occurred. Even so, staff expressed little opportunity for input into changes. However, while both front of house and back of house staff often empathized with inequities between them, experiencing a change to a service charge was considered a disappointing income loss to many front of house workers.

Finally, customers may need more education about these policies. Whether staff worked in an establishment with traditional tipping or a service charge they often felt customers did not understand the full scope of activity involved in creating and serving quality food and experience. To some extent staff felt service charges may reduce overall potential tips, particularly depending on how management distributes service charges. Explanations provided to customers were either unclear or not fully aligned with the experience of staff.