The hospitality industry is evolving in Florida, as it is across the country. With recent legislation at the federal & state level affecting minimum wage, tip-pooling practices & sick leave, full service restaurants will be forced to adapt and evolve with the new legal terrain. When Florida voted for a $15 minimum wage in 2020, we looked at a variety of ways to address the changing labor market. We knew we would need to change our business model in order to compete in an extremely tight labor market. We looked at different models, weighing the pros and cons, and landed on a service charge to ensure that our team is well compensated and continue to attract top talent while ensuring that our guests continue to receive an outstanding experience and our company is well positioned for the future.
Beginning in October, our Oak and Ember Steakhouse will move to a 16% service charge model, and Kyle G’s Prime Seafood and Steaks and Kyle G’s Oyster and Wine Bar in the first quarter of 2022.
There are many changes and conceptions of terms used. Below are some definitions and FAQs to help answer any questions.
Service Charge: A service charge is a set percentage added to every guest check. The total amount of the service charge is the property of the restaurant which helps pay for labor and benefits for all employees. The service team is paid an hourly wage plus commission.
Gratuity: A gratuity or tip, is money paid for service in addition to the check. Tips are usually shared between the server, bartender and support staff, including bussers and barbacks. A gratuity is at the discretion of the guest and is completely optional.
Tipped Employee: A tipped employee works for the state’s tipped minimum wage rate. The goal is that the minimum wage plus gratuities equal or exceed the state’s non-tipped minimum wage. This employee is a direct W2 employee. Tipped employees are subject to overtime pay rules.
Commission Employee: An employee who receives wages based on commission of items sold, usually determined by a set percentage of sales. Under The Fair Labor Standards Act, so long as a commissioned employee is in a sales position and receives at least 50% of all compensation from commission and earns equal to or more than the state’s non-tipped minimum wage, the base wage may be set at any dollar determined by the employer. This employee is still considered a W2 employee and should have no difference in their individual tax filing status. Our servers and bartenders receive 16% commission of their total sales net of Comp & Voids. Commission employees are not subject to overtime pay per The Fair Labor Standards Act.
Tip Credit: Under federal law and in 43 states, employers may pay tipped employees less than the minimum wage as long as employees receive enough tips to make up the difference. The credit itself is the amount the employer can reduce from the state non-tipped minimum wage to pay a tipped employee the base wage. Currently in Florida, the tip credit is $3.03 and the non-tipped minimum wage is $10.00 per hour, thus making the tipped minimum wage $6.97 per hour. This tip credit is in jeopardy of being repealed, further raising labor costs for employers. Further, Florida voted that the minimum wage will increase $1 per hour every year until it reaches $15. The tip credit does not increase commensurately and may not even be around in 5 years.
Frequently Asked Questions:
In the traditional restaurant tip model, do servers keep 100% of their tips? No, there is a long standing practice of tipping support staff such as busboys, bar backs, service bar, food runners, and in some restaurants hostesses. This can cause a server or bartender to tip out approximately 20% or more of their total tip revenue.
How are your team members compensated in a service charge model? Our team is paid an hourly wage plus a 16% commission reflected as a 16% service charge. We also have an additional gratuity line for exceptional service. Our service team receives 100% of both the service charge and the additional gratuity.
Are service charges considered tips or wages? A service charge technically is the property of the restaurant, in which the restaurant then pays for hourly wages, benefits, etc. In this model, our service team does receive 100% of the service charge.
Why did you move to this model? Our team consists of a large group of professionals. From our service team to our culinary team. We already have excellent compensation built into our business model for our culinary teams, and we are happy to say we lead the way with wages in our area and have the highest compensated culinary teams in our area. By moving our service team to a commission based model, we are able to continue to provide an incentive based model to retain and attract professional servers and bartenders that will continue to deliver our high quality service we are known for.