• Expert Advice on Additional Gratuities

    POSTED April 10, 2019

    Do those service charges make their way to workers?

If the chatter on meeting planner social media channels is any indication, service charge fatigue is real. And it’s making it harder for planners to justify that “Additional Gratuities” line item in our budgets.

If you’re a planner reading this column, chances are you’ve tipped out of your own pocket. Because work simply must get done. We couldn’t produce successful events without the support of so many hospitality professionals, many of whom rely primarily on tips as compensation for their work.

Under U.S. federal law, there are two classes of workers: those who make tips and those who do not, with different rules for each. Currently, the federal minimum wage for tipped workers sits at $2.13 per hour. Yes, $2.13 per hour. And, it hasn’t increased in more than two decades.

In practice, employers must follow whichever law—federal, state or even local—is the most generous to employees. In Michigan, the minimum wage for tipped employees sits at $3.25 per hour and assumes that employees will make enough tips to earn $5.73 per hour.

In theory, employers are expected to make up the difference if tips don’t bring workers up to that $5.73. But, there is no real accountability to ensure that happens. So, it’s no surprise that in 2016 the U.S. Department of Labor reported an 84 percent violation rate in this area.

Last September, Michigan lawmakers adopted a proposal that would gradually raise minimum wage to $12 an hour by 2022, including for tipped workers. This kept the proposal off the ballot for a public vote. Postelection, however, lawmakers have made major changes to that proposal, and it’s unclear how tipped employees will benefit.

Meanwhile, mandatory venue and supplier service charges continue to increase. According to one hotel industry source, in the past 17 years, U.S. lodging industry fees and surcharges have increased every year except for brief periods following 2001 and 2008 when lodging demand declined.

As a planner, I often remind clients that service charges don’t necessarily make their way to the people that help us every day on the front lines. Under federal law and in most states, employers may keep any money designated as a “service charge.” The law generally considers this part of the contract between the patron and the establishment, not a voluntary acknowledgment of good service by an employee.

Many employers give at least part of these service charges to employees, but that’s the employer’s choice. Employees have no legal right to that money.

So, the bottom line is that if you want to make sure your service workers are being compensated properly, you should always ask for an itemized breakdown from your venue or supplier. What does their service charge cover and how are those funds distributed?

With that information in hand, you can budget appropriately and defend the need for those additional gratuities.

For information about tipped minimum wage laws in each state, visit dol.gov/whd/state/tipped.htm


Carol Galle is the president and CEO of Special D Events, a business meeting and special event management agency and Detroit destination management company, based in Ferndale. She is a member of the Michigan Meetings + Events Hall of Fame and Editorial Advisory Board. 

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