To auto-grat or not auto-grat, that is the question. And it is a question that doesn’t have a one-size-fits-all answer. Some service staff are for it, and some are not. Some customers don’t mind it, some resent it. Some restaurants approve of it, some don’t.
Tipping, in its many forms, involves a precarious and, at times, perilous conversation. It is, after all, how servers make the bulk of their income. But at the same time, if service fails to meet the customer’s’ expectations, a forced tip can leave a sour taste in a patron’s mouth.
With this in mind, we’ve drawn out some of the complexities that are involved in this conversation and put together some auto-grat policy pointers below.
Auto-grat legalities in the US and Canada intersect and differ depending on region.
In 2014, a ruling by the United States Internal Revenue Service agency determined that an auto-grat is a non-tip wage. This means, that instead of walking out with cash tips at the end of a shift, servers receive auto-grat tips as an add-on to payroll after “it’s subject to Social Security tax, Medicare tax, and federal income tax withholding.”
Similarly, the Canadian Restaurant and Foodservices Association determined that tips billed as an automatic gratuity are considered “controlled tips”. Controlled tips are subject to taxes, as the Canada Revenue Agency requires the employee and employer to pay source deductions the same as wages.
With a typical tip, servers pay their bar and kitchen dues and walk away with cash. But auto-gratuities are subject to the same taxes as their hourly wage. This leaves servers and restaurants with a choice: either get paid now and risk the whim of the customer (a risky roll of the dice), or add the standard eighteen percent and wait until payday.
A quick Google search reveals some of the following feelings customers have when faced with an auto-grat:
“I’m at a pub yesterday to watch some Olympics and grab some food by myself at the bar. Grab bill, look down: “Automatic Gratuity – 20%”. I had no waiter/server. I was at the bar and wasn’t told about this charge. How is this any different than going to a supermarket, seeing an advertised price of $3 for a loaf of bread, and going to the till to pay and getting it scanned, and it coming up as $3.60? …”–Barry M
“Automatic gratuity is not only insulting to me as a diner. It’s insulting as a contributing member of the American economy. Why do restaurants and other service industries feel that the customer is responsible for paying the employees? Why are restaurant owners exempt from paying their employees a living wage? Why do we, as paying customers, let it happen?”–Jason Kessler
Needless to say, auto-gratuity isn’t always well received. While some customers see the auto-grat as taking away the guesswork, others see it as an infringement on their liberties as guests, or the restaurant industry using customers to pay staff. This auto-grat complexity makes it imperative to communicate with guests. After all, the service could be great but if the customer isn’t anticipating the bill they receive, they could easily end up offended, promoting them to rebuke the tip, simply never come back again, or take to the megaphone that is Yelp.
With these two hot buttons in mind, here are a few discussion points and consideration for your internal auto-grat policies:
Whether you like it or not, the auto-grat conversation is not going anywhere, and neither are opinions on the subject. For the benefit of your restaurant, carefully consider what is best for you, your staff, and your guests, and put a clear policy in place.