Wage Inequity is Plaguing the Restaurant Industry. Here’s How Four Restaurants are Fighting It.

The restaurant industry has a wage problem.

It’s one of the only industries where workers can legally be paid under the already low Federal minimum wage of $7.25 an hour. Restaurants can operate while paying staff a sub-minimum wage of just $2.13 an hour, leaving the rest of an employee’s compensation up to the good will of customers in the form of tips. This is the base of wage inequality in the restaurant business.

Tips are an essential part of a restaurant worker’s take-home pay. But tips can be unpredictable and inconsistent, making it difficult for workers to budget and plan their finances. Often, tips earned by different workers, even those in the same position, can be unequal—based on party size, busy-ness, and sometimes, luck of the draw.

The practice of tipping, which is rooted in slavery, has created a work environment where BIPOC workers are historically paid less than their white counterparts, and female workers make less than their male counterparts. It leads to discrimination, sexism, and sexual harassment, and creates a disparity between the back and front of house. It has left far too many of its workers to rely on food stamps—an irony that shouldn’t go unnoticed.

Because tipping is so deeply woven into the fabric of restaurant culture, it’s hard to imagine the industry without it. But in order to break free from tipping, it’s going to take a bevy of restaurant operators willing to stick their neck out and make a change. Tip pooling, service charges, and transparency are all ways these four restaurant operators are leading the charge into a new era for restaurants.

A flat wage and tip structure at bartaco

bartaco, a full-service restaurant with 26 locations and counting, has taken an innovative approach to employee wages—they’re all the same. Their base wage is calculated per location, depending on state and local laws (bartaco operates in 11 states and D.C.)

“If you’re a dishwasher, a host, a busser, a food runner, a line cook, you all make the exact same base wage. There is zero differentiation in them whatsoever,” says Anthony Valletta, bartaco’s President.

The idea behind this eliminates the argument of anyone being paid differently based on experience, ethnicity, age, gender identity, or beliefs. The only exception to the rule is the bartenders are grouped separately.

Listen: Anthony Valletta on The Pre-Shift Podcast

With an equitable wage in place, they’re able to pay each employee nearly $20 an hour, which can climb to upwards of $40 an hour during the busy season.

“We all know for the longest time that the back of house employees have been underpaid for decades in the restaurant business. They’re the hardest working people, the dishwasher’s always been the lowest paid person and they are the hardest working, hardest job, most impactful job in the entire restaurant. And arguably sometimes the most under-compensated. So now [at bartaco], that employee is making the exact same amount as the tenured line cook,” says Valletta.

The result? A team that truly works together towards a common goal. And for some team members, big life changes. Valletta tells us of one team member that was able to quit their second job and spend more time with family.

Pecking House’s even tip split

Brooklyn’s Pecking House has an origin story that could only take place in 2023. It started as a pandemic pop-up in Chef Eric Huang’s family restaurant (as he says himself, kind of like The Bear), and evolved to one of NYC’s hottest new spots shortly after opening. Starting a restaurant during the pandemic has given Huang a unique perspective when it comes to how his staff works and gets paid.

Huang intentionally designed the service model to be simple. It’s effectively counter-service, which can be done with little to no training. You order and pay at the counter, and your food gets brought to you by someone from the kitchen. The team also prompts diners to add a tip—one that gets split equally amongst the staff.

“We advertise broadly that we’re an equitable tipping restaurant. There’s a sign right there in front of the register,” says Huang.

With this in place, Pecking House is able to pay an average of $7 an hour on top of the entry-level rate of $15 an hour, so no one on the team makes an hourly wage less than $22.

Lazy Betty’s service charge model

Lazy Betty in Atlanta is very much a fine dining restaurant—but one without the stereotype of long hours for low pay. Chef Ron Hsu decided to do a service charge model even before the restaurant opened.

“It was a very conscious decision as we were developing the business plan and doing the financial projections and all that, we came across all these questions. How do you want to handle payroll and pay your staff? For me, it was very important to do a service charge because I wanted it to be more equal,” says Hsu.

The service charge gets added on top of the bill, and staff split it based on their position in the restaurant.

“We try not to emphasize one position over the other. If you have, let’s say, a hundred hours in your labor pool and someone works 10% of those hours, they will get 10% of their allocation of the service charge,” says Hsu.

The service charge model at Lazy Betty has positively impacted staff morale and teamwork in addition to turnover. But the real impact is peace of mind.

“I think our staff likes knowing that they’re going to make a certain amount of money. There's a little more security,” says Hsu.

Hsu also works with RAISE: High Road Restaurants, an advocacy group for fair wages and racial and gender equity in the restaurant industry.

Recommended Reading: Why 4 Restaurants Chose a Service Charge Instead of Tips

Pay transparency and weighted tip pools at Katie Button Restaurants

When Katie Button’s award-winning restaurant, Curate, closed due to pandemic shutdowns, she took the opportunity to make sweeping changes to how her staff got paid.

Leaving the sub-minimum wage behind, Button worked with Just Economics to determine a living wage for Asheville, North Carolina, and based their base pay rate for front and back-of-house employees around it.

In addition, they’ve created transparency around how pay increases come—with education and advancement. For example, someone in the back of the house may get a bump to coincide with learning a new station. Or for the front of the house, servers may get a pay raise when they pass a wine course. This practice takes the uncertainty out of what an employee needs to do to get more money—it’s all laid out for them and in their hands.

 

Button also takes tips into account.

Curate follows a weighted tip pool model, where all of the tips are pooled together and distributed depending on positions—favoring the front of the house, as they interact more with diners. It’s a step forward in the right direction, according to Button.

“This equation of the problem with tips would be solved, you know, if the sub-minimum wage pay went away and minimum wage changed because it would force restaurant operators to do something different.”

Katie Button also recognizes how important tips are to a restaurant worker’s total compensation. So after one year, her team’s PTO is paid out at the average rate they received the previous year, inclusive of their tips.

Serving what’s next

These are just four restaurants that are putting in the hard work to change the restaurant industry for the better. It’s a long road ahead to a more equitable industry for workers, and chipping away a bit at a time is the only path forward.

To learn more about the above restaurants and more operators who are changing the game, check out servingwhatsnext.com and the 7shifts podcast, The Pre-Shift.