gratuity included?!

[andiesenji]

There are some venues where tips are very, very good. One of my nephews worked at the Santa Anita racetrack clubhouse just on weekends, to finance his college career. His shift pooled their tips and divided it equally with a portion for the barman who handled their drinks orders. He did very well indeed. Now he is an astronomer working on some mountaintop in Chile and makes hardly anything but has nowhere to spend it either. He keeps writing home for long underwear and sweaters....... His Santa Anita days a distant memory.

One of the young women who used to work in our office, an inhalation therapist, moved to Las Vegas and worked in her profession for a year then started moonlighting as a banquet server. Soon after she began working full time as a server and is making more than three times the amount she made here.

[mb7o]

Service charges for any mixed group (by that I mean more than 2 parties together, like 4 co-workers at lunch or 3-couples at dinner) is understandable, since people under-estimate what they owe. But the percentages keep getting higher and higher.

Recently, there were 6 of us at dinner. We ordered different numbers of courses. Service was pretty good, but forgetful. Simple things, like not bringing spoons for the soup, and more serious things like skipping the drink promised as part of the tasting menu (it was the first night of the menu and we hadn't all ordered it). We mentioned it and the waiter sort of recovered. But in the end we got a 19% service charge... wasn't worth complaining, but it was unexpectedly high.

Note that in Seattle, the minimum wage for servers is something on the order of $7-8/hour. Also, any mandatory service charge is taxed with sales tax.

What do restaurants do about mandatory service charges on alchohol? I've never quite understood why a $100 bottle of wine should be twice as hard to serve as a $50 bottle of wine, is the a 18-20% charge added on top of that?

[beans]

More enlightened restaurants and hotels collect all charge tips and tax them and put them in paychecks, covering the tax obligation. Stiffing a waiter costs them double: that evening and on April 15th.

In practice, isn't this more than overcome by the underreporting of cash tips?

Be honest.

The IRS imputing 8% tips on sales wasn't always so; it developed as a remedy to the widespread practice of not reporting, or underreporting, tips.

Not that I blame servers for cheating the IRS, in fact, I encourage it.

If I had to bet money, I would say more servers are undertaxed on their true income, than overtaxed.

I sure hate this tipping can of worms, but I'm happy to explain the inner workings as much as possible in hopes to demystify any of it for the average restaurant going patron. Restaurants are machines with many smaller teams supporting others to get each evening accomplished. Tips do not solely "reward" the server but in fact support the many others that indirectly contribute to the whole dining experience.

Regarding those lucky servers in Seattle earning $7.00 an hour -- luckily they have a kinder and more generous system behind them to have the chance of actually earning a wee better living. And taxes, I've noted how high they are around the whole King County area. Ouch. I don't find either any justification for complaints about tipping! edit add: Factor in cost of living. Earning $7.00 or thereabouts an hour in expensive Seattle may be the equivalent of earning $2.13 an hour in Cleveland....

Okay, about that stigma of declaring 8%: Beyond what sdelgato stated, if the overall figure of declared tips for the entire service staff doesn't mesh with overall sales volume of the restaurant come tax time, red flags go up and the restaurant can be audited.

The IRS eats out! They know that servers are tipped 15% or better (which of course is the tip outs to those in the team that have helped, so if you think 15% is high, the server is netting much less after tipping out the busboys, hostesses, food runners and service bartender).

Then comes the allocations. Those are the worst -- especially for those that have faithfully declaired their tips, cash or otherwise. That is added income tacked onto to your W-2 (yes, check your W-2s there is a wee box for this category). This is applied to the whole group as income that has failed to declare to be taxed and the accountant or bookkeeper will try to do allocations as fairly as possible. He/She will take the overall sales and the overall labour hours of the FOH staff and determine that will be $x.xx per hour then multiply that by each employees' actual hours worked for that tax period.

Possibly interesting to note, there is much peer pressure among the various sections (we have several designated sections for servers, i.e. on the main diningroom, the right, the left, the pool patio, the patio, upper deck, boats -- and ditto for our seven different bars) that tend to be cut about the same time, do closing duties for that section together and clock out together -- be honest and declare your frickin tips!!

If I followed that 8% "guideline" or under claimed my tips, I would have never been able to purchase a car or my house!

A current trend in proactive audit avoidance and seems to be popping up with more frequency are restaurants (usually the biggie chains) that require you to sign an agreement that you will declare 100% of your tips in order to remain employed. Managers actively supervise that as well.

Lastly, the only saving grace a tippable person may have for their defense in the event of an unsavory appointment for a personal audit with the IRS -- maintaining that little book they offer. It is free, you write in your sales volume and declared tips. And a CYA move -- write down say a newspaper headline from that particular day to authenticate your honest effort. Anyone can grab a book at the eleventh hour and fill it with a bunch of meaningless numbers....

Whew!

edit II: never write anything semi-serious while talking on the phone!

Edited July 6, 2004 by beans (log)

[glenn]

Okay, about that stigma of declaring 8%:  Beyond what sdelgato stated, if the overall figure of declared tips for the entire service staff doesn't mesh with overall sales volume of the restaurant come tax time, red flags go up and the restaurant can be audited.

I believe sdelgato implied that the 8% IRS rule is a figment of someone's imagination. There was an IRS regulation years ago that 8% was the minimum amount that could be declared. However, the law is and has always been that tipped employees are required to declare 100% of their tips.

Every restaurant is required to complete IRS Form 8027 each year. This is an informative report that lists the sales, broken down by credit card and cash, and tips, broken down in the same manner. It also differentiates direct and indirect tips - what Beans was referring to before with payouts. It's pretty simple at a glance for the IRS to see if there might be a problem with under reporting. Any restaurant owner with half a brain will report 100% of credit card tips. Some try to get away with under reporting cash tips. The 8027 report makes it somewhat easy to discern if that is the case. It really doesn't pay any more to mess around.

When a restaurant is caught by the IRS for under reporting, often the IRS will sometimes coerce the restaurant into signing an agreement where the restaurant follows strict rules about reporting. Restaurants do this to avoid punitive measures. In fact, this is a very controversial area and one that the Restaurant Association opposes bitterly, but that's another story.

This is applied to the whole group as income that has failed to declare to be taxed and the accountant or bookkeeper will try to do allocations as fairly as possible.  He/She will take the overall sales and the overall labour hours of the FOH staff and determine that will be $x.xx per hour then multiply that by each employees' actual hours worked for that tax period.

Really? I just allocate it to the front of the house staff I hate.

[beans]

Okay, about that stigma of declaring 8%:  Beyond what sdelgato stated, if the overall figure of declared tips for the entire service staff doesn't mesh with overall sales volume of the restaurant come tax time, red flags go up and the restaurant can be audited.

I believe sdelgato implied that the 8% IRS rule is a figment of someone's imagination. There was an IRS regulation years ago that 8% was the minimum amount that could be declared. However, the law is and has always been that tipped employees are required to declare 100% of their tips.

emphasis mine

That must have been years ago....

I didn't didn't state anything to the effect that sdelgato was incorrect about their post implied or otherwise, but I wrote "beyond" what they stated. But now that's splitting hairs.

This is applied to the whole group as income that has failed to declare to be taxed and the accountant or bookkeeper will try to do allocations as fairly as possible.  He/She will take the overall sales and the overall labour hours of the FOH staff and determine that will be $x.xx per hour then multiply that by each employees' actual hours worked for that tax period.

Really? I just allocate it to the front of the house staff I hate.

Wow.

Something I also thought I'd add in for those reading this thread to think about....

Here's the agreed to tipping out procedure for most of servers (except for the boat servers) wherein I am employed:

1 1/2 percent of the total sales goes to the food runners

1 percent of the total sales goes to the assigned service bar

1/2 percent of the total sales goes to the bussers (they are the only FOH staff that earns at least minimum wage)

Some restaurants may divide up the tip outs with the bar only being tipped on the overall liquor sales and foodrunners/bussers on the food sales of each server's closing report. We have found that the straight percent off the total sales to work the best because the servers need to respect the hard work of those that help them. And of course, these are the minimum percents. Those that tip best... well, y'all understand.

As a server you hope to walk after tip outs with 15% of your sales.

Edited July 6, 2004 by beans (log)

[Pan]

1/2 percent of the total sales goes to the bussers (they are the only FOH staff that earns at least minimum wage)

Do you have any idea why they're the only FOH staff to earn at least minimum wage?

[beans]

This may be unique to us and our bussers. We have four that have returned each season that are amazing. In fact, one of them has been there about 12 years. They are clean, fast and courteous hard workers eager to come to work and return for another season. Our managers really appreciate them. Our General Manager may have been the push behind this because he started as the thirteenth busser, in January, fourteen years ago? (We've never had thirteen bussers ever since, nor have any in the winter months anymore, so something about him was spotted wisely by one who did hiring. )

edit: Hmmm. Recounting the years and correcting... wow that was fast and where did they go?

Edited July 6, 2004 by beans (log)

[glenn]

I didn't didn't state anything to the effect that sdelgato was incorrect about their post implied or otherwise, but I wrote "beyond" what they stated.  But now that's splitting hairs. 

Hey beans, chill. :) I was saying that sdelgato was incorrect when he said the 8% thingy is a myth. It was a reality about 12 years ago or so.

Here's the agreed to tipping out procedure for most of servers (except for the boat servers) wherein I am employed:

1 1/2 percent of the total sales goes to the food runners

1 percent of the total sales goes to the assigned service bar

1/2 percent of the total sales goes to the bussers (they are the only FOH staff that earns at least minimum wage)

You lost me on this. Where do the waiters fit in? And where does the total tips received fit into the formula?

[beans]

I didn't didn't state anything to the effect that sdelgato was incorrect about their post implied or otherwise, but I wrote "beyond" what they stated.  But now that's splitting hairs.  

Hey beans, chill. :) I was saying that sdelgato was incorrect when he said the 8% thingy is a myth. It was a reality about 12 years ago or so.

Chill? I'm precise and not upset or worked up. I simply do not wish to have any misunderstandings by any implications. I quoted Juanito addressing that entire post and expanding upon, beyond what sdelgato wrote. Okay?

And besides, declaring 8% is still a common myth for today's servers. We have to "demysitfy" each time we start their new hire paperwork and training.

Here's the agreed to tipping out procedure for most of servers (except for the boat servers) wherein I am employed:

1 1/2 percent of the total sales goes to the food runners

1 percent of the total sales goes to the assigned service bar

1/2 percent of the total sales goes to the bussers (they are the only FOH staff that earns at least minimum wage)

You lost me on this. Where do the waiters fit in? And where does the total tips received fit into the formula?

Each server takes their total tips and tip those folks out 1/2, 1 or 1 1/2 percent on their total sales, regardless of what overall tip percent they average on each ticket. Food for thought for those that feel 15% is too much to tip a server. Food runners, service barstaff and bussers depend on what you tip the server, too.

Edited July 6, 2004 by beans (log)

[glenn]

What is the purpose of basing the indirect tips on sales instead of strictly on total tips rec'd? My guess is to prevent dishonesty?

[Juanito]

I didn't mean to confuse the issue. The imputing 8% rule was the way it used to be, as best I can recall. So many service personnel routinely declared such a small amount, that the IRS simply said, fine, you want to play that way, then we're going to ASSUME that you made AT LEAST 8% tips on your total sales, and we expect 8% of your total sales to be declared as income. If you don't declare it, we'll tax you on it anyway, because we know you're lying.....or something like that. It was never meant that servers were only responsible for 8%, simply that it was the minimum they could get away with reporting.

I was aware that the law changed somewhat in the last few years, moving the responsibility to operators to be sure that their servers are reporting honestly. Perhaps that's when the 8% rule fell by the wayside.

There still is not, to my knowledge, any way to police, with 100% accuracy, cash tips. Staff get screwed all the time out of their tipouts by unscrupulous servers, who, fortunately, are a small minority.

[beans]

glenn: I'm not sure I'm getting what you are asking.

If a server rang up $1,000 in sales, regardless of what they have earned in tips 1/2 percent of the $1,000 goes to the bussers ($5), 1 percent to the bar ($10) and 1 1/2 percent to the food runners ($15) out of their overall tips.

In order to cash out, they are required to obtain a signature from the shift captain from the bussers, assigned service bar and food runners to verify they paid their tip out(s). (As well as from their own shift leader, but that is to prove that they completed their running and closing sidework).

Is that what you mean about preventing dishonesty?

edit to add: I was being tied up in the numerical figures and policy.

It motivates the server to sell and earn those fat tips because they go into the shift knowing that three percent of their sales is going to tip outs from their own earned tips (out of their own pocket). In the event they just for one reason or another don't do well, the straight percentage tips to the ones that run their buns off and sweat hard while doing it -- the bussers, service bar and food runners -- they are not penalized and still get a piece of decent change for their efforts. Does that make sense?

Edited July 6, 2004 by beans (log)

[glenn]

Beans, I guess I didn't make myself clear. Here's what I meant by preventing dishonesty: With the system you use, the indirect tips are based on a tangible number (sales) leaving no room for cheating. Most systems are based on actual tips, which often lends itself to dishonesty - cash tips can't be verified.

I never heard of basing tips on sales, though I'm not saying it's wrong or I disagree with it. It may work well for your establishment. But what if the tips were abnormally high or low? Then someone is getting screwed, either the waiter or the indirect tipped employees.

There is no perfect system. I found what works best for one place might not be best for another.

[Mulcahy]

Otherwise it isn't fair to servers because large parties often stay at the table far longer than regular parties and the server is cheated far too often by cheap jerks.

I love my friends and family, but some of them are cheap. The 18-20% gratuity on a large party means I don't have to haggle with my buddies to get them to cough up enough money. This makes me exceedingly happy. And grateful to the restaurant.

[beans]

Beans, I guess I didn't make myself clear.   Here's what I meant by preventing dishonesty:  With the system you use, the indirect tips are based on a tangible number (sales) leaving no room for cheating.   Most systems are based on actual tips, which often lends itself to dishonesty - cash tips can't be verified. 

I never heard of basing tips on sales, though I'm not saying it's wrong or I disagree with it.  It may work well for your establishment.  But what if the tips were abnormally high or low? Then someone is getting screwed, either the waiter or the indirect tipped employees.

There is no perfect system.  I found what works best for one place might not be best for another.

Oh, I see.

If tips are abnormally high, then yes a few extra bucks gets distributed to those that helped you -- share in the love, right?! I've never tipped out at the minimum percent (edit to add: I've always tipped more than) and can remember many a time throwing a twenty at my service bartender when I was a boat server. Another time I can remember tipping out a bar back twenty bucks to wheel a case of a particular champagne onto one of my yachts I was waiting on. I also tipped out the dock boys for saving the prime docking spot for said yacht because their captain phoned ahead to me to confirm their intentions of spending an evening at our restaurant because they were a bit late on getting underway and requested my station on the dock. Boat servers generally don't have bussers on board (boat servers must self bus) but I've asked and tipped a ten to a busser to find one of those huge sized lexans, fill it with ice and take it aboard the boat I was serving as I went to schmooze our linens lady for a white cloth to dress up the container of ice for the case of champagne that was just dollied aboard by a barback.

If you had a crappy night, then at least those that are being tipped out on your sales volume, they will see the number, see your frowning sad face and may waive you tipping them out or still expect you give them the bare minimum. Depends on much -- especially if they remember you've been generous on previous occasions, or if you never provide more than what is the bare minimum. (I can remember a server that tipped out only in quarters. Yes it was money, but it was a bit inconsiderate to the fellow employee. She wasn't invited back the following season).

This system works and what comes around, goes around. Even if one gets the short end of the stick and gets stiffed on the tip outs, but then everyone knows, hears much about it and management steps in. It rarely occurs again because if you don't tip out the runners, bussers or service bar -- you will no longer find yourself on the schedule.

Dizzying isn't it? And come to think of it, I've never worked in a restaurant or bar that didn't base tipping out on anything else other than sales volume.

Edited July 6, 2004 by beans (log)

[KatieLoeb]

1/2 percent of the total sales goes to the bussers (they are the only FOH staff that earns at least minimum wage)

Maybe where you are, but in PA the minimum wage is $5.15/hr. and the bussers earn $4.23/hr +tips. Servers make $2.84/hr. +tips. The only FOH employees making minimum or better are the service bartenders ($6.00/hr.) and the hostesses (varies from $10-$13/hr. depending on their level of expertise in juggling a tiny and exceedingly busy dining room)

[beans]

Yeah, oHIo is a crappy state in many ways!

We've discussed how limited our liquor and wine selections are....

Alaska the general starting pay for barstaff was $9.00 an hour. And I was often tipped in the freshest fish by those hunky fishermen. Great hourly that added up to a decent bi-monthly paycheck, great cash tips and ones that make sure you always had dinner to eat! Why did I leave?

[Pan]

Why did I leave?

Yeah, why, and why don't you go back? But I guess that's a topic for your bio thread...