Earlier this year, Joe’s Crab Shack, a large restaurant chain in the U.S. eliminated the practice of tipping and increased the pay of its workers. As several other American restaurants have moved towards ending tipping, the future of this long held practice is being called into question. The idea of abolishing tipping shouldn’t be completely dismissed, but is a decision for individual businesses to make.
Tipping is the act of overpaying a bill, usually by around 10 to 15 per cent. The extra money is supposed to go to the employee who provided the service, usually as a measure of the quality of service provided.
There are several arguments to be made against tipping. First, tipping can easily be used by businesses as an excuse to not pay staff the minimum wage of $11.25 but instead the serving wage of $9.55 in Ontario. Adjusting someone’s salary to expect tips forces the customer to pick up financial burdens that the company should be carrying. Tipping can also be arbitrary, as what constitutes good service varies from person to person—a server can’t be expected to guess each different standard.
Tipping is also hard to regulate. In Canada, tips are supposed to be declared to the Canadian Revenue Agency (CRA), and can count towards income tax. However in 2012, the CRA found large-scale tax evasion through unreported tips—amounting to thousands of dollars per waiter.
On the other hand, there are benefits to tipping. First, the cost of the wages gets passed on to the customer anyways. Joe’s Crab Shack and other restaurants that have eliminated tipping all increased the menu prices by 12-15 per cent.
Furthermore, while there are many different standards of good service, there are definitely clear, widely accepted expectations to be met while doing any kind of work in customer service. Eliminating tipping could take away the incentive for workers to provide good service. As for taxes, does the government really help low-wage workers by taking thousands of dollars from them?
If the government wishes to improve the standard of living for low-paid workers, they should do so by lowering taxes, encouraging access to training and education, as well as encouraging innovation and entrepreneurship. The government can’t support Canada’s low-wage workers through salary quotas and red tape.
In the end, it should be up to each business, in consultation with their employees, to decide what works best. Business owners should be trusted to have the knowledge, the experience and the flexibility to both serve their customers and have sustainable business practices. There isn’t any one business practice that will suit the needs of every restaurant, and this should be considered when it’s Canada’s turn to decide the future of tipping.
