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Three Surprising Ways Danny Meyer's No Tipping Plan Will Help Waiters, Bartenders, and Sommeliers

Danny Meyer, the only 57-year-old St. Louis native with his own I Love NY ad, shocked the culinary world last week when he announced that he was raising prices and eliminating tipping at his thirteen full-service dining establishments. The plan, which Meyer has dubbed Hospitality Included, will allow him to more fairly compensate all of his staffers – especially cooks, who often make less than waiters. Simple, right? Well, not necessarily. The trick with the switchover is to avoid alienating servers and other front of the house employees, who could theoretically end up earning less. Case in point: San Francisco's Bar Agricole and Trou Normand, both of which reverted to traditional gratuity policies last week after suffering waitstaff departures.

So Meyer's Union Square Hospitality Group is seeking to stave off defections through two smart policies. First: The group is issuing a three month wage guarantee. Formerly tipped-employees (waiters, sommeliers, bussers, bartenders) will earn as least as much as they did during the same period the previous year. Second: Those employees will receive, in addition to a $9 base wage, something called "revenue share." Translation: Waiters will be able to share in the success of a big week of sales – an intelligent riff on the standard tip pool system.

These are all decisive changes that dining room staffers will see immediately. But in the long term, waiters, bussers, bartenders, sommeliers, and even managers will find that Hospitality Included can financially benefit them all in more nuanced, equitable, and surprising ways. Here's how.

1. No Tipping Will Create Financial Incentives for Mentorship

Revenue share at The Modern is expected to be calculated on a weekly, as opposed to a nightly basis, which should theoretically halt shift chasing, because waiters working a slow lunch will still benefit from a busy Saturday night. But a weekly revenue share also means a senior waiter's earnings can be impacted by a junior server working another shift. In other words: You're only as strong as your weakest link. Such a reality, according to USHG chief cultural officer Erin Moran, will create a financial incentive for mentorship. "If you’re one of our top performing servers, you have the opportunity to positively influence your income potential to train and develop other servers to be as great as you are. Because even when you’re not here, if they’re better skilled, that increases your income potential."

That gets us back to where we started: shift chasing. Senior team members will now have a more compelling reason to actually want to work those slower shifts (or bring younger servers up to busier nights). And customers will benefit from an all-around more professional waitstaff whenever they dine. It's a win-win.

2. All Staffers, Including Waiters, Will Have Goals for Career Advancement

Waiters don't currently have a heck of a lot room for financial and professional growth; what they make is largely a product of what diners leave in tips. But under Hospitality Included, Meyer will be able to give out merit raises to waiters and other front of the house staffers, because their income is now determined by a restaurant's professional standards, not by a diner's generosity. Raises could take the form of increases to base wages, to revenue share, or both.

USHG's Moran offered a bit more granularity on the career development process during an interview at The Modern earlier this moth: "We’re putting a little more power in the hands of our employees to drive their growth, because they’ll have knowledge of what’s required to increase their income, as well as access to support their skill development." Moran added that there would be transparency in the promotions process, and that USHG would have clear stepladders linking career growth with corresponding skills, and "if you are able to show these skills, this is how your income potential might increase."

So what we're seeing is further evidence of the waitstaff's professionalization, with USHG restaurants laudably attempting to mimic the meritocracy of the corporate world. And those who argue that ending tipping could result in lazy career waiters, consider the following comment by Dino Lavorini, Meyer's director of operations at the Museum of Modern Art. "Your value in that [revenue share] pool, whether you’re entry-level or five years down the road, is a reflection not of your tenure, but of your contribution, and of your ability to grow and take on the responsibility of developing others in the process."

3. Danny Meyer Will Tackle the Tricky Issue of Salary Compression

During my interviews with various USHG executives, one of the issues that almost everyone brought up was salary compression, which is HR speak for the when there's only a small difference in pay among employees with various experience levels or job titles. So in the hospitality industry, this problem manifests itself when hourly (or tipped) employees like waiters, line cooks, and sommeliers sometimes make as much as (or more than) floor managers, sous chefs, and even wine directors. Ending tipping and raising prices will give USHG a little more financial freedom to help chip away at this problem, which can act as a disincentive towards hourly employees seeking promotions and taking on more responsibilities. Or put more succinctly: Salary compression can stifle the best employees from rising to the top.

To understand why this happens, you need to understand not just tipping, but overtime rules. Most hourly employees, under federal law, are automatically guaranteed time and half pay for hours worked over 40. So because USHG cooks often put in 50 to 55 hours per week, a $14/hour salary ($29K per 2,080 hours) – could theoretically turn into an annual rate of pay into $41K to $46K. Add on a few extra bucks per hour for more senior cooks and you can see where things go from there. Salaried employees like sous chefs, by contrast, often don't qualify for overtime, because the federal limit, set in 2004, currently remains $23,700. That paltry number, not too far above the poverty line for a family of three, doesn't just act as a determent to career growth, it allows, at more cynical institutions like fast food franchises, crafty owners to pay staffers a just-low-enough salary to get them to work tons of overtime for free.

President Obama, aware of these ignominies, has moved to more than double the salary threshold in 2016, a development that will help millions more qualify for overtime throughout the country. But this regulation will also end up helping some workers in a different way: By essentially encouraging businesses to raise salaries to just above the new limit. Meyer belongs to this latter group; he'll raise his managerial salary floor to no less than $50,440. That will help with compression but it won't solve it; the $50K limit is still less than what certain waiters, sommeliers, and line cooks will end up making. And the new higher rates for entry-level managers will cause compression with more "seasoned" managers above them, and so USHG will have to adjust its salaries throughout the chain of command.

But what about any extra hours that sous chefs, wine directors, and floor managers might end up working? Well, USHG will introduce in January a more long term variable component to managerial salaries, tied to operating profit. That policy that could help create a larger beneficial "wedge" between worker bees and queen bees. And as a result, previously tipped or hourly staffers will find a financially more attractive reason to advance in their careers.

Of course, there will still be exceptions. "There will be a time that an hourly may make more than a salaried manager," Sabato Sagaria, USHG's chief restaurant officer, wrote in an email. "That is OK though. There are some individuals that don't have aspirations of entering management but they will still have an opportunity to grow." Right on.

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