DON’T TIP SCALES: EATERIES
Ire at NY wage bill
New York restaurant owners have a tip for Albany: Don’t change the rules about gratuity. A whopping 95% of restaurateurs oppose a legislative campaign to eliminate the tip credit system that allows owners to pay less than minimum wage to waitstaff who earn tips, according to a new survey by the NYC Hospitality Alliance set to be released Monday. Some owners said the change could lead to higher menu prices, staff layoffs — and could even threaten their businesses’ very existence. “It’s clear New York’s restaurants and bars rely upon the tip credit,” said Andrew Rigie, executive director of the NYC Hospitality Alliance.
“There’s no reason for the state’s elected officials to upend the working model of New York’s restaurant industry and put small businesses and jobs on the chopping block, while making it much more expensive for New Yorkers and visitors to dine out in the Empire State,” Rigie said.
Price hikes & layoffs
In the survey of 879 restaurants, conducted in December, 97% responded that they were extremely or somewhat concerned about eliminating the tip credit, with 88% saying it would be a disaster for their businesses.
Some 76% of restauranteurs said they’d increase menu prices to offset the cost of paying staff the $16 minimum wage, and 42% would consider eliminating tipping altogether to keep the prices down for customers.
Two-thirds of the owners said they’d have to lay off employees — which occurred when the District of Columbia ended the tip credit.
More than half of the restaurateurs — 54% — said they would consider closing shop.
The NYC Hospitality Alliance also issued a report that noted that restaurants and bars were just starting to recover from the COVID-19 pandemic shutdowns and restrictions and post-pandemic inflation.
If the credit is eliminated, it will cost about $12,000 more to employ a full-time tipped worker per year, the report estimated.
The current system
Under current law, city restaurants may pay tipped workers a base wage of $10.65 per hour as long as that wage combined with their tips equals or exceeds the current minimum wage.
The $5.35 differential is the “tip credit” for the service industry.
If the total pay with tips is less than $16 per hour, the employer is required to pay the difference.
Restaurant servers often make far more — around $20 to $40 an hour with tips, the report said.
The Hospitality Alliance opposes legislation pushed by Assemblywoman Jessica GonzalezRojas (D-Queens) and Sen. Robert Jackson (D-Manhattan) that would abolish the tip credit and have waitstaff in the city paid $17 an hour by 2026. The change would go into effect on Long Island and in Westchester by 2027.
Gonzalez-Rojas said in her memo backing the bill, co-sponsored by 35 other Democrats, that the current system “created an environment where workers are victimized, and in some cases, encouraged to turn a blind eye, to rampant discrimination and sexual harassment by clientele and managers.”
The bill would not prohibit gratuities, and it would also allow tip-sharing between waitstaff and “back of house” personnel, such as cooks, dishwashers and others who often do not receive tips.