Operator said the inability to share tips is the issue, not tips themselves.
Danny Meyer, CEO of Union Square Hospitality Group, announced Monday that his restaurants will allow tipping after eliminating the monetary option five years ago.
In 2015, the company started a model called “Hospitality Included,” which factored wages and benefits for all employees into menu prices. The primary goal was to close the wage gap between front-of-house and back-of-house employees. Meyer explained in a post on LinkedIn that as menu prices rise due to inflation, front-of-house workers see a boost in income, while back-of-the-house staff are left behind because tip sharing is illegal in New York and Washington, D.C., the two cities where USHG operates.
Meyer noted that while Hospitality Included made strides in closing the wage gap, it was difficult to “make the math add up for all stakeholders, even in far more robust economic times.” He cited challenges with adjusting menu prices to cover employee benefits, keeping dining room compensation competitive with restaurants that allowed tipping, and teaching customers a system that didn’t let them thank workers with a tip.
The shutdown of dining rooms gave his team an opportunity to consider the viability of the compensation model. With employees facing an uncertain future due to the COVID pandemic, Meyer decided that allowing tips was the best option for restaurants.
“We’ve come to believe that it’s the inability to share tips that is the problem, not the tips themselves,” Meyer said in a statement. “Our ultimate goal is for your tips to be shared among our entire team, so both kitchen and dining room teams can benefit when a guest has a great experience. That will take a shift in public policy and we are actively doing all we can to persuade state and federal lawmakers to make that change.”
In order to keep its goal of narrowing the wage gap, restaurants will provide a share of revenue for back-of-the-house employees and will increase total compensation by an average of 25 percent across the full-service concepts.
“Over the past five years, I’ve been beyond grateful for the courage and grit that countless USHG professionals have shown in overcoming cultural challenges and ingrained societal norms to implement Hospitality Included, never losing their collective commitment to delivering hospitality to our guests,” Meyer said. “While we wait to reopen our dining rooms, we remain as committed as ever to seeing our employees fairly compensated and will continue to advocate for laws and business models that allow that to happen.”