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Transparency in Tipping Blog

Transparency in Tipping: Manager Tip Outs

{Part 1 of 3}

June 2016, with exceptions, Ontario Law was amended to exclude members of management from participating in tip pools. This had a huge impact on the hospitality industry, as small & large businesses were now responsible to pay higher wages to replace lost income in the cases where managers were no longer eligible.  As an advocate for a living wage, on the surface this was a no-brainer for me. Let’s not pretend, that small restaurants are raking in the coin. In-fact, profit margins are small (in the area of 6% in 2017) and making ends meet is (also) hard for small business owners.

Small Resaurant

Hitting Smaller Restaurants Harder

January 2018, minimum wage increased to $12.20 for servers (or $14 for non-tipped positions). The gap between server income and manager income shrunk. When minimum wage increased, many who were already above it, expected the same percentage increase to keep the gap the same size.  How does a small restaurant stay in business? Raise the menu prices? Pay the servers, hostesses, cooks, and managers more, and take hit on profitability? These questions are hot on the tails of the emerging & controversial concept of abolishing tipping altogether (read my next blog post for more on this topic).

Restaurant Tipping
Transparency in Tipping Blog Post

The Manager Quotient

At Earls, General Managers make on average of $83,000 annually (Canada wide) and do not receive tips. In Toronto, the average restaurant manager makes $43,000 annually, some who receive tips and some who do not. Despite the law being clear, the question remains: are managers legally allowed to receive a tip out? Managers are eligible to receive tips under these circumstances: they participate in service. There is a clear definition of what “participating in service” means.

Managers who spend most of their time to a substantial degree participating in service or doing like work to employees who do receive tips are legally eligible to be tipped out. In a small restaurant, a manager needs to participate in service, seat guests, bus & reset tables, run food, assist on service bar, and in some cases, take a few tables – small restaurants often do not have a designated host, busser or food runner (positions that are generally tipped out).

Team Tip Outs

The total tip out for a server is between 2 and 5% and can often include a manager tip out, generally 1% of each servers sales.  The remaining percentage goes to service bar, hostess, culinary and dishwashers – otherwise known as the team of people who assisted in ensuring prompt service and an overall good experience. It can be seen as a small price to pay, as servers make a disproportionately higher income than others working the same service. The point often overlooked is that if a server was seating guests, bussing their tables, running all their own food – ultimately if we are using the average of 1%, that is a small number relative to the gross tip – service has the potential to not be quite as good, resulting in a smaller tip.

The Big Picture

Hospitality is a team-based environment; we all work together to serve the guest and create a warm, neighbourly experience. After all, the tip that a guest pays, is for the overall experience, which is created by the whole team. For this reason, tips are the incentive for all participating members to contribute in a positive way.

As a restaurant owner, my view is that transparency is key here.  With this in mind, it is important to be clear with your staff on your policy of who receives tips.  All things considered, and a hot topic, what do you think?

Lisa Wilson-Lall Rustic Social House Ownership 

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