Large parties might no longer be subject to required tipping

 Tipping is a practice that varies from culture to culture. In many countries, tipping isn’t expected and in some cases, it is not even allowed. However, in America, servers and bartenders rely on tips for their economic survival. And, Americans are quite generous when it comes to their tipping practices. According to recent statistics released in The Wall Street Journal, the average American tips around 19.1% when dining out, a number that has increased steadily over the years.

While generosity with the wait staff seems to be expected and commonplace, many restaurants still adhere to an automatic tipping policy for large parties. For example, national chains like Olive Garden and Red Lobster add an 18% gratuity to the bill for parties of 8 or more. It’s a practice that is meant to help protect the server and ensure that they receive adequate compensation for all of their hard work. If a server spends half of her shift tending to a large party that ultimately ends up stiffing up on the check, it could mean that he or she might not earn enough that day to pay for his or her cost of living.

However, the practice of automatic tipping might soon be on the way out. Recently, the Internal Revenue Service (IRS) announced that it would no longer consider automatic tips as a gratuity. Instead, the IRS will now view automatic tipping as a service charge, which means that this amount will now be subject to payroll tax withholding.

Generally, servers are in charge of reporting their own tips. The amount of their tips is then added to their base wage in order to ensure that servers are making at least minimum wage per each shift. However, now when it comes to automatic tipping, the amount will be withheld until payday as part of their general pay. Not only will this mean increased costs and paperwork for restaurant owners, but it will also mean that servers will have to wait until payday before they are able to get their tips from large tables. Most servers rely on these big-ticket tips in order to help them pay their bills, and waiting a few weeks to receive their pay can be a hardship that many servers would rather not endure. That’s why many servers are upfront about their displeasure with the IRS mandate, and it is part of the reason why so many restaurants are now considering ditching their automatic tipping mandate.

Alternatively, even if restaurants do not abolish automatic tipping, servers will be unable to receive their tips for large parties until they receive their paycheck each month.  Yet most servers prefer to go home with their tips in their pocket, as this allows them to budget and to be on top of how much they earn and how much they can afford.

 It’s just another cost that many restaurants cannot afford, especially since many establishments are now scrambling to get health insurance for their employees who work 30 hours a week or more. All restaurants who employ 50 or more people must now provide health insurance to their staff, although the Obama Administration recently gave employers until 2015 before they will start facing fines for failing to do so.

As with the Affordable Care Act, many people are now balking at the IRS’s new decree on automatic tipping. It’s another example of how the least wealthy in our country become those who pay the highest price for the country’s floundering economy and lack of stability. Servers are already overworked, and with this new mandate, many restaurants will likely now get rid of automatic tipping altogether. This means that servers will be at risk of being underpaid while serving large tables, a reality which could prove to greatly decrease their take-home pay at the end of each shift.

Now, with automatic tipping under fire, it seems that servers will be the one who ultimately pay the price for the IRS’s surprising decision. Let’s hope that Americans continue to be as generous with their tips as they have been in the past, especially when it comes to large parties.