To Auto-Grat Or Not?
Restaurateurs faced an important decision at the beginning of 2014 based on new IRS guidelines that re-classified auto-gratuities as service charges versus tips. The dilemma? To continue to allow larger parties to be charged an auto-gratuity and face additional paperwork to incorporate these tips service charges into an employee's wages on pay day, or, eliminate the common practice altogether and let the service staff be at the mercy of their guests generosity.
Furthermore, the service staff would have to wait the entirety of the pay period to receive the service charge on their paycheck versus taking home their gratuities at the end of a shift. When we were faced with this question at our restaurants, we polled the staff and clearly explained the pros and cons of the situation at hand. Unanimously, our staffs elected to eliminate the auto-gratuity in lieu of a printout on the check displaying 15, 18, and 20% gratuity amounts.
The new system has been in place now for nine months, and the results are in. Since the elimination of auto-gratuities at our restaurants, gratuities are up 3.56% versus when the auto-gratuity policy was in effect.
It appears to us that given the opportunity to tip generously, it might just be in the server's best interest to let guests do so.
