In a quickly changing labor market, the old models of employee compensation are feeling outdated. With rising rents, changes in health care costs, and legislators across the country raising the minimum wage, many employers are re-examining how to pay their staff equitable wages – especially cooks. One of the first strategies many owners are experimenting with is to eliminate tipping. We talked with 3 business owners to learn more about how the bar and restaurant industry is adjusting to the new realities of employee compensation.

Kurt Huffman, the owner of Chefstable, has opened a number of bars and restaurants. When he began working on Loyal Legion, a beer hall in Portland, Oregon, he decided to open it with a gratuity-free model. Instead of using tips to compensate his bartenders and servers, he raised the price of beer and offered his Front of House staff $18/hour.

Unfortunately, Huffman’s idea ran into some problems. “Essentially what we got was a lot of awesome people that had very little bartending or server experience” he said. “Most of those employees have stayed with us, and in the 6-8 months they’ve been with us, now they know the job. But at the beginning, they didn’t have bartender radar.”

His new recruits were eager, but needed training. Huffman ended up dedicating a lot more training and management resources to the bar than he had anticipated – costing him a “a fortune.” After a few months of testing, he returned to a tipping model. “I told my staff,  ‘I think I put in place a system here that costs me more to pay you guys less.’” Servers at Loyal Legion now make $10/hour with tips, earning an average of $32/hour.

After going back to tipping, Huffman also raised his kitchen staff to $18/hour. This “was a big win” as line cooks are hard to attract and retain. “For the kitchen $18/hour is a wonderful wage. If we can get everyone to $18/hour, that’s the formula for keeping kitchen talent.”

Aaron Adams, owner and Head Chef at Farm Spirit, runs a totally different business model. His chef-counter style restaurant offers a prepaid ticket for a 12-course tasting meal with an 18% gratuity added automatically. Fed up with the wage disparity between the Front of House and the Back of House, Adams decided to do away with those roles completely.

At Farm Spirit, your cook is your sommelier and your chef is your waiter. You sit and watch as they prepare your meal, serve it to you with pride and if you have questions about it, you get to listen to Adams and his co-workers nerd out about food.

So far, Adams’ chef-counter model has been successful and he’s able to pay his employees a consistent living wage with ample room to grow. “I’m trying to eliminate the wage slavery we’re all a part of,” Adams said. “My goal is for everyone [I employ] to make 50k a year and have benefits and have two weeks off a year — and I’m already getting there.”

Scott Dolich, owner of The Bent Brick and Park Kitchen, is experimenting with what he calls the “one house” model. Much like the Farm Spirit model, Dolich plans to cross-trains cooks and servers, eliminating house roles and the wage disparity that traditionally come with them. In order to ensure consistency and quality, however, central roles like head chef and bar manger will not cross-train.

“After we go gratuity-free in July, all of my cooks/servers will get paid somewhere between $14 and $15/hour,” said Dolich. To make ends meet, Dolich will raise his menu prices by 18%. While customers will see an increase in price, it’s not more than they would’ve paid previously with tip.

Dolich isn’t a fan of tipping as a management tool. “Tipping is a very passive-aggressive way to leave feedback,” he said. “And tipping is not the only way to get good service; you have to have competent managers in place to maintain service quality.”

Dolich plans to roll out his tip-free model over the next few months, giving him time to make adjustments as he goes.

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Whether you run a small place with counter service or a restaurant with a full bar and front-of-house staff, the bottom line is that restaurants and bars are going to continue to experiment with compensation. It’s a challenge to equalize staff pay without raising prices so much that customers are scared away, while still providing a quality menu and stellar customer service.

Owners and managers – What kind of creative compensation strategies have you tried? How have you addressed raising wages, and the real wage disparities between the FOH and BOH? What has worked and what hasn’t? Leave us a comment and let us know about your experiences.

Source: ttps://poachedjobs.com/2016/03/the-future-of-tipping/