The Pros and Cons of New Restaurant Minimum Wage Rules

By: Jackie Sabol

6 Minute Read

May 18, 2018

restaurant server minimum wage

Minimum wage is a hot topic in today’s political climate, and any major hikes can be a challenge to accommodate for most small businesses. In the restaurant world, we need to consider that increases in minimum wage will have to be applied to both tipped and non-tipped employees.

Additionally, federal and state regulations differ in the context of minimum wage, depending on which type of employee we’re talking about. There are also regulations on tipping that further complicate the issue.

reA tipped employee, according to the U.S. Department of Labor, is an employee receiving a minimum of $30 per month in tips. In accordance with the Fair Labor Standards Act (FLSA), the minimum wages for tipped employees on the federal level are as follows:

  • Basic combined cash and tip minimum wage: $7.25
  • Maximum tip credit against minimum wage: $5.12
  • Minimum cash wage: $2.13

Federal minimum wage for non-tipped employees is $7.25, for the record. Of course, every state’s regulations vary, based on factors such as gross annual sales and number of employees.

An increase seems to be on the horizon for many states who have not already adopted a higher minimum wage, which could result in both positive and negative changes for your restaurant. Here are some pros and cons to ponder if and when the time comes for you to figure out how to make this change at your business:

PRO: Raising minimum wage limits wage disparity between FOH and BOH staff

It’s pretty obvious to see that every single member of a restaurant operation has a lot of weight to pull, though some positions offer higher compensation than others. Servers and bartenders can walk home with hundreds of dollars a night, while dishwashers typically make a fraction of that.

The subject of increasing minimum wage tends to create tunnel vision towards higher menu prices as a solution. It’s difficult to get servers to buy into explaining such increases to guests. It seems like the best way for restaurants who have raised the minimum wage substantially have had to do away with tipping and implement a service charge so that tips can be shared legally across both BOH and FOH staff.

Seattle’s Renee Erickson has raised her minimum wage to $15 for all staff by implementing an 18.5% service fee on all checks and redistributing this across BOH and FOH employees. This has helped bump all staff up to the $15 minimum wage while minimizing the negative impact on profits. Now the wage gap between some FOH and BOH positions is getting smaller, and the new service charge has not negatively impacted servers who relied on tips previously in any major way. It seems to be working out so that they are taking home about the same amount, give or take a few bucks.

And let’s be honest – spending hours at a washing station, scraping piles of cold mashed potatoes and chewed gristle into the trash, dealing with scalding hot pots and pans, all while handling harsh soaps and chemicals should pay enough that someone can support a family without needing a second or third job as is typical for those in this position.

CON: Scaling raises in a way where all feel appreciated is challenging

restaurant minimum wage news

While it’s wonderful to give a raise to someone who probably works more than one job (which many BOH staff members do), there are positions that should be at a higher pay scale than others. For example, if line cooks receive a substantial raise, will the sous chef and executive chef also receive a similar bump in pay?

You don’t want to create resentful employees, so this is a particularly delicate balance to strike. It may be a matter of enacting a bonus for those who are in positions that should be paid more than others at their place of work due to position, education, and seniority.

PRO: Make your managers’ lives easier

Who has worked in a restaurant where all the servers are satisfied with their earnings every night? Anyone? Didn’t think so.

There are great nights, and there are awful nights. With to Erickson’s service charge, this up and down is not as much of an issue any longer. There is little change in overall pay when adding a mandatory service charge that aligns with raising employees pay $15 minimum wage. Managers can spend less time agonizing over fair scheduling and avoiding accusations of favoritism. (P.S. If you were interested in comparing average tips on different days throughout the week, your POS should give you these restaurant analytics and reporting.)

Additionally, it might be easier to attract more employees for the FOH who would rather a steadier paycheck, and will alleviate the need to rely on special events such as Valentine’s Day and New Year’s Eve-type for a bump in income. There is a lot of potential for staff to be happier overall, as frustration from nights where the tips aren’t flowing as heavily are offset by a more obvious demonstration of the law of averages with a built in service charge. And with a higher minimum wage for BOH, turnover will naturally decrease there as well.

CON: You’ll have to reset guest expectations

restaurant staff wages

You’ll need to figure out where the money to pay a higher wage for your workers is going to come from. Whether you add a service charge or increase menu prices, you’ll have to make sure your guests buy into your decision. Most guests are likely expecting to tip at will, and may be surprised to see either higher menu prices or an automatic service charge. Whether or not they accept this change without complaint will have a lot to do with how you present the changes. Some restaurants present a note along with the menu explaining the changes, and utilize social media to inform their patrons of any changes to price.

Whether or not you support a raise in minimum wages for restaurant workers, it's something that is out of your control. Luckily, there are cases where a change in this area has been executed successfully with little negative impact to profit. There may be some pains at first, and this can be expected. But with staff members that are more productive overall or who would enjoy a steadier cash flow, you could end up with a better restaurant because of it.

DISCLAIMER: All of the information contained on this site (the “Content”) is provided for informational purposes only and not for the purpose of providing legal, accounting, tax, career or other professional advice. The Content is provided “as-is” without any warranty of any kind express or implied, including without limitation any warranty as to the accuracy, quality, timeliness, or completeness of the Content, or fitness for a particular purpose; Toast assumes no liability for your use of, or reference to the Content. By accessing this site, you acknowledge and agree that: (a) there may be delays in updating, omissions, or inaccuracies in the Content, (b) the Content should not be relied upon or used as a substitute for consultation with professional legal advisors, (c) you should not perform any act or make any omission on the basis of any Content without first seeking appropriate legal or professional advice on the particular facts or circumstances at issue and (d) you are solely responsible for your compliance with all applicable laws. If you do not agree with these terms you may not access or use the site or Content.

no call no show

Toast Restaurant Blog

Never Miss a Post

Subscribe to stay up to date with the latest restaurant news and trends!

No Thanks.
DISCLAIMER: All of the information contained on this site (the “Content”) is provided for informational purposes only and not for the purpose of providing legal, accounting, tax, career or other professional advice. The Content is provided “as-is” without any warranty of any kind express or implied, including without limitation any warranty as to the accuracy, quality, timeliness, or completeness of the Content, or fitness for a particular purpose; Toast assumes no liability for your use of, or reference to the Content. By accessing this site, you acknowledge and agree that: (a) there may be delays in updating, omissions, or inaccuracies in the Content, (b) the Content should not be relied upon or used as a substitute for consultation with professional legal advisors, (c) you should not perform any act or make any omission on the basis of any Content without first seeking appropriate legal or professional advice on the particular facts or circumstances at issue and (d) you are solely responsible for your compliance with all applicable laws. If you do not agree with these terms you may not access or use the site or Content.