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Sunday, September 29, 2013

Guest Post About Changes to Automatic Gratuities by Rebekah Kollar at Waitressresume.net

Automatic Gratuity Changes
Starting on January 1, 2014 restaurants will have to report automatic gratuity as a service charge. Currently, the IRS considers automated gratuities as regular tips. The new rule states that a tip is something “given without compulsion and customers must have an unrestricted right to determine the amount.” This new change is causing controversy amongst restaurant owners and their employees.

Many restaurant owners and their employees are upset by this new change as it will not only cause more paperwork, but it will mean that these service charges will be subject to tax withholdings. Servers are upset because it means that their guaranteed tip after working a party of 20 is gone, ultimately causing the potential for less money in their pocket at the end of the night. Restaurant patrons seem to be speaking out more regarding automatic gratuity as this new change approaches, and they seem to be in favor of it. Many find that the automatic gratuity allows the server to slack as they are guaranteed a certain amount in tips no matter what type of service they provide the guest.

Typically automated gratuities are only added to parties larger than 6 people and/or added to private room rentals and events. Often times larger groups will either want to pay separately causing mass confusion and frustration for both. For example, if you have a group of 20 people that are in a private dining area and are moving about the room ordering drinks it can be quite difficult for the server to keep the people and their tabs organized. In other cases, guests will get so caught up in conversation they won’t realize that the others in the group didn’t leave a tip. Large parties can be very time consuming as well as demanding at times. By adding an automatic gratuity to the guest’s bill, it eliminates the risk of the server losing out on their tip amongst the confusion that comes along with serving a large event or group. These automated gratuities provide a sense of financial security for the server. 

As many restaurant owners are struggling with this new law, others have been working on creating solutions. Some restaurant owners have been testing out a new system that allows guests to add their own tip, but with some suggestive tipping amounts. Typically when a server hands the guest their bill it contains the items the guest ordered, individual prices, tax and a total. Well, these restaurants are taking a new approach by adding a section at the bottom of the bill with suggested tipping amounts. For instance, if the guest’s total was $67.98, the section at the bottom would have the following:

Suggested Gratuity
18% = $12.23
20% = $13.59
25% = $16.99

Subtotal: $67.98

These calculated numbers are being called suggestive tipping amounts. Restaurants that have been trying this new method are hoping that it will encourage guests to increase their tipping and therefore make up for the fact that automatic gratuity will soon disappear. So far, this seems to be the most common solution. How is your restaurant planning to handle the change?
This article was written by Rebekah, a restaurant manager in Minnesota with 15 years of experience in the hospitality and food service industry. Her writing can be found at the Restaurant Insider blog and the Waitress Resume website.

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