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By: Serach Nissim
New York restaurant owners overwhelmingly oppose lawmakers’ initiative to change the rules around tipping. About 95% of restaurateurs are against a legislative campaign to eliminate the tip credit system, as revealed by a new survey by the NYC Hospitality Alliance. As per the NY Post, the survey, released on Monday, questioned some 879 restaurants in December about the proposed legislation for gratuities, discarding an owners’ current right to pay wait staff less than minimum wage as long as the tips will make up the balance. The survey revealed that 97 percent of restaurants were extremely or somewhat concerned about eliminating the tip credit, with 88 percent saying it would be a disaster for their business.
Some of the restaurant owners argued that such a law could cause staff layoffs, higher menu prices, and even business closures. “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.
Some 76 percent of restauranteurs said they would have to increase menu prices to offset the big increase in expenses if they had to pay staff the full $16 minimum wage. The survey showed that 42 percent would also consider eliminating tipping altogether, in order to keep the overall costs as low as possible for customers, per the Post. A whopping two-thirds of restaurant owners said they’d have to cut their number of employees if the bill is passed — which is actually what happened in the District of Columbia when it ended the tip credit. Over half of the restaurateurs, or 54%, said they would even have to consider shutting down their establishment.
Along with the survey’s findings, the Hospitality Alliance issued a report that said eliminating the tip credit would raise costs for restaurants and bars, right when they are starting to recover from the COVID-19 pandemic shutdowns and restrictions. The report also notes that restaurants are ailing from post-pandemic inflation and continued lower traffic due to remote work. The report estimated that if the tip credit is eliminated, it will cost about $12,000 more annually to employ a full-time tipped employee. The Hospitality Alliance opposes the proposed legislation.
Currently, the law allows restaurant employers in NYC to pay workers who customarily receive tips a base wage of $10.65 per hour, if that wage combined with their tips equals or exceeds $16 per hour, allowing the total to reach the current minimum wage. So, in effect, the $5.35 differential is the “tip credit” for the service industry. Currently, if the $10.65 base wage and the combined tips equals less than $16 per hour, the employer is required by law to pay the employee the difference. Many restaurant servers end up making well over the minimum, with their total hourly coming to $20 or even $40 after tips, the report said.
Per the Post, the legislation sponsored by Assemblywoman Jessica Gonzalez-Rojas (D-Queens) and Sen. Robert Jackson (D-Manhattan) would abolish the “tip credit” and dictate that wait staff be paid $17 an hour by 2026, for those employed in NYC, Long Island and Westchester.
