Don't forget to reduce your tips by the percentage they were previously being taxed, since it is all charity anyway.
Hopefully this becomes another straw that will eventually break the camels back and we get rid of tipping all together. Every restaurant in the world does not need tips to survive, except for the ones in the US.
This is going to expand tipping dramatically. I don't understand how you could have any optimism that tipping will go away after this is passed.
Businesses are going to work hard to blur the line between a tip and a required payment so that they can call their income a tip while customers think they're obligated to pay it.
Tips subsidize profits, plain and simple. But, America runs on poverty, so this is in line with the broader socioeconomic strategy.
> Tips subsidize profits, plain and simple.
Nah. Profitability for the business would be higher without tips. I take x% of gross income as profit. No tips means I can charge the customer more, which means a higher gross income, which means more profit. When tipping is involved, the money slips through without allowing the business to take its cut. Good for the server, but not good for the business.
However, as theoretically great as it sounds, you are ultimately beholden to what the customer wants. There is good reason why every restaurant that has tried a "no tips" policy has failed. Nobody shows up to dine. They go somewhere else where they can tip instead. Regular people actually enjoy tipping, as hard as it may be to believe for those who are staring at screens rather than enjoying the ambiance of a restaurant.
It's not that simple. Restaurant owners don't pay payroll taxes on tips, but they do pay it on regular wages. Raising restaurant menu prices by 20% (or the average tip amount) will not result in 20% (or the average tip amount) more going to the workers. Some restaurants have tried this out, and it's backfired. Restaurants already run on very thin margins; a loss of a few percent can kill them.
Also consider that customers will get sticker shock: even though they are ultimately paying the same price, seeing 20% higher prices on the menu will make them spend less. Yes, it's dumb, but human psychology is dumb, so there we are.
(Folks in Europe are used to the listed price being what they pay. In the US businesses don't generally list tax-included prices, but businesses that do include tax in their prices end up looking -- in the eyes of customers -- as more expensive than those that don't, even when the final prices are identical.)
"Some restaurants have tried this out, and it's backfired. "
Where I live, many restaurants have the "required 18% gratuity" thing and ask that you not tip beyond that. Maybe this is a PNW hippie specific thing, but a movement against tipping exists and is being ran by some good, successful, restaurants.
Making the tip required isn't a movement against tipping, it reenforces the idea.
Try increasing the posted food prices by 18%, or add a "18% owner boat fund", instead and see what happens. You won't last the week before you are bankrupt. The amount is exactly the same, so from a financial point of view there is absolutely no difference, but the experience of "helping out the little guy" is lost, and that will chase clientele away. For all the huffing and puffing we hear, actions speak louder than words. The reality is that customers like tipping!
Personally, I hate the whole concept of tipping as promoted in the USA.
I see it as a way that owners can avoid paying the relevant taxes for employing their staff and instead offload part of that payment onto the customers. The arbitrariness of it also annoys me - why just waiting staff?
I'm in the UK, so we mainly have service charges added to the bill to take the place of tips which is a much better system. I also like the Japanese culture of non-tipping and that they may get offended by customers leaving tips.
> I hate the whole concept of tipping as promoted in the USA.
Of all the ways people choose to spend their money, tipping is a strange one to hate. It is not like Taylor Swift pointlessly flying around the world to the detriment of the environment, and thus everyone. It seems pretty foolish, I get that, but fools and their money are to be easily parted. What is the harm in their foolish fun?
> I see it as a way that owners can avoid paying the relevant taxes for employing their staff
Assuming staff will be paid more. That is unlikely in a lot of cases.
Granted, if you are in one of the states that allows tip credits that would be more true given that they would be legally required to move up to minimum wage irrespective of tips, but many states require that staff be paid at least the full minimum wage already and tipping is still just as common in those places.
It is not like McDonalds is paying their staff more without tips (above excepted). Like the death of manufacturing saw an end to high paying manufacturing jobs, the end of tipping would see an end to the $50/hr. waitress. It wouldn't be supplanted.
> why just waiting staff?
You can tip whomever you want — or not tip at all. But in most cases only the business is liable, so it is the only entity you need to please. When alcohol is involved, however, the server becomes liable, so it is in your interest to grease those wheels else get cut off. It is not like anyone tips the waiting staff at McDonald's. It traditionally has only been a custom where alcohol is found for that reason.
But it wasn't long before people realized that they enjoy it! It gives them the thrill of "sticking it to the man", or "helping out the little guy", or in some cases "Look at me. I can pay you more than your own boss can! Aren't I great?". In fact, they liked it so much they have started tipping in other places.
> I'm in the UK, so we mainly have service charges added to the bill to take the place of tips which is a much better system.
That sounds like a tip by another name. How is that a better system? It seems exactly the same (except the customer can't easily opt out of it). Many places in the US do that too (oft known as an auto-gratuity), especially for large parties in restaurants, for what it is worth.
> I also like the Japanese culture of non-tipping and that they may get offended by customers leaving tips.
Whereas on the other side of the pond the opposite is true. I picked up some shifts as a server a while back for what is a long story, but suffice to say money wasn't my motivation. I was collecting a developer's paycheck at the same time, meaning, as I am sure you can math, I was making way more than 99% of the people I was serving, so I felt pretty strange and pathetic taking their "pity money", so I tried rejecting them.
That didn't end well. Customers started getting quite upset with me. In one case I bypassed the tip screen on the credit card machine and the customer not fully paying attention didn't notice and walked out without tipping. Five minutes later he comes stomping back in and gave me an earful about not taking his tip while shoving cash in my face.
I used to think like you, but once I actually experienced it, it became abundantly clear that the customers are there to tip in the kind of establishment that is built on that type of business. It is part of the experience.
Those sitting at home staring at a screen might not understand the appeal, but they aren't the customer.
> Restaurant owners don't pay payroll taxes on tips, but they do pay it on regular wages.
Payroll taxes in most jurisdictions are based on wages, not profitability of the business. A non-issue, well, except maybe for the server who has grown accustomed to making $50/hr. No tips and those days are long gone.
> Some restaurants have tried this out, and it's backfired.
Yup. Hard to win customers when tipping is part of the experience. I mean, it can be done where it isn't — McDonalds survives, thrives even, without tips — but if you are trying to run the type of restaurant where the customer comes to tip it doesn't fly. You have to give the customer what they want at the end of the day, else they'll go somewhere else. This is the challenge businesses face.
> Restaurants already run on very thin margins
Exactly, and if you increase the volume then the product of the margin gets bigger. Remember, Walmart and your average restaurant have the same profit margin! Walmart's advantage is that they handle way more money, so the total amount that margin represents is huge. If a restaurant can also handle more money...
> seeing 20% higher prices on the menu will make them spend less.
Even just, say, 1% higher still means more cashflow through the business, which means more cash to take a cut from. You are right that the full 20% would unlikely ever be realized, certainly not right away, but it doesn't need to be to still be advantageous. But until you figure out how to convince the customer to change their preferences about tipping, good luck.
There is absolutely no obligation to leave a tip. One only does so because they want to!
> Also consider that customers will get sticker shock: even though they are ultimately paying the same price, seeing 20% higher prices on the menu will make them spend less. Yes, it's dumb, but human psychology is dumb, so there we are.
It's not dumb; it's just that paying that 20% to the waiter is a lot easier to stomach than a 20% increase to the restaurant owner.
https://www.pewresearch.org/2023/11/09/how-americans-feel-ab...
Why do you take a fixed profit. Why don’t you charge the amount which maximises profit?
Because x% is the maximum profit. Not even places like Walmart, for all their might, have figured out how to exceed the same x% (somewhere around 2-3%).
I've already been doing that because I tip with cash. Credit card tip is self-contradictory.