Automatic Tips for Large Groups May Soon Disappear
The chain in July stopped automatic tips at 100 restaurants in four cities, where it is testing a new system in which the restaurants include three suggested tip amounts, calculating for the customer the total with a 15%, 18% or 20% tip on all bills, regardless of party size. Diners can opt to tip more or less than the suggested amounts, or to not tip. Depending on how patrons react and how well the new software system works, Darden may switch to such suggested tips at all of its restaurants. A spokesman said the company will decide by year-end.
According to the Wall Street Journal, the IRS is reclassifying automatic service charges — i.e. that 18 percent service charge you sometimes see when dining out in groups of six or more — so that they’re treated as regular wages and subject to payroll taxes, rather than tips, which are up to employees to report to the IRS come tax time. Restaurants like those from Darden, which includes the Olive Garden and Red Lobster, are considering getting rid of the automatic gratuity charges for large groups and testing out suggested tipping to see if they can work around the new tax rules.
Also: Serious Eats has a discussion of how to tip when dining at the bar, and has this to say to those who complain about the tipping system in the U.S.:
Don’t like the system? Thinking “Why is taking care of the employees my business?” Well, because you’re eating at a restaurant in America, and by doing so, electing to participate. And maybe some day we’ll figure out a different system, like every other goddamned country. But for now, this is what we got.