Hot Tips: Vermont Restaurants Explore Gratuity Alternatives 

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• Matt Mignanelli

The routine of tipping is ingrained in the American restaurant experience: At the end of the meal, a server presents you with the check. You determine a percentage of the total, scribble it on the "tip" line, then add it up. The hardest part is summoning fifth grade math skills, unless you whip out a smartphone.

The now-ubiquitous model became common in the U.S. after the Civil War. According to national nonprofit One Fair Wage, "the restaurant industry sought to hire newly freed Black people without paying them, forcing them to live on tips." The federal minimum wage was instituted in 1938, but tipped workers — including most restaurant servers — were excluded. To this day, many front-of-house employees receive the hourly "tipped minimum wage," currently $2.13 federally and $6.59 in Vermont, half of the full $13.18 minimum wage.

Tipped employees rely on customers to make up the rest, 15 to 20-plus percent at a time. Servers at busy restaurants with generous customers frequently make well above what they'd bring home at the standard minimum wage. But those numbers fluctuate with customer whims, the weather and the night of the week. And back-of-house employees rarely see the same compensation.

The predominant payment model "was created on a premise of inequity and it still works to divide wage earners across lines of race, gender, age, economics [and] visual appearance," Leslie McCrorey Wells, co-owner of Burlington's Pizzeria Verità, Trattoria Delia and Sotto Provisions, told Seven Days via email.

"People who rely on tips have their livelihoods dependent on the 'kindness of strangers,' creating a power dynamic that can be abusive," she wrote.

Vermont is one of 43 states that permits the tipped minimum wage, but a bill introduced to the state Senate this session, S.108, could lead to changes. In addition to raising the minimum wage to $15 per hour by January 2025, it would study eliminating certain exemptions, including the tipped minimum.

Meanwhile, Wells and other local business owners on the leadership council of the Vermont Independent Restaurants coalition are considering alternative tipping models that could lead to steadier, more equitable wages for all employees.

What do those models look like in practice? And how do they affect the bottom line, both for restaurants and for diners tallying up their totals? Several alternatives — including tip pooling, service charges and fundraising for community organizations instead of accepting tips — have already shown up at bars and restaurants around the state.

Diving In

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• File: Carolyn Fox
• Diavola pie at Pizzeria Verità

Wells favors the approach taken by restaurants such as Michelin-starred Dirt Candy in New York City: abolish tips and charge enough for the food that the restaurant can afford to pay staff a livable wage with benefits. It's a bold move, and one that hasn't worked in every case. New York City's Union Square Hospitality Group lost roughly 40 percent of longtime front-of-house staff when it shifted to a "hospitality included" model in October 2015, according to eater.com. The group returned to tipping in July 2020.

Pizzeria Verità and Trattoria Delia aren't quite at the tip-abolishing stage, but Wells saw the early pandemic shutdown of in-house dining as the right time to make things more equitable for all of the restaurants' employees. Regulations had recently changed to allow back-of-house workers to share in a tip pool, as long as everyone on staff received at least the full minimum wage, rather than the tipped minimum.

Now, everyone at Pizzeria Verità earns at least the Vermont minimum wage of $13.18, and tips are split equally. The pooling system is a bit more complicated at Trattoria Delia, where front-of-house employees earn minimum wage and take home 70 percent of tips. Back-of-house wages vary from $15 to $19 per hour; kitchen staff split 30 percent of the tips.

Like Pizzeria Verità, Winooski's Onion City Chicken & Oyster operates with a tip pool; all employees start at $14 per hour or more and receive an equal share of tips per hour worked.

"There's constant discussion about the differences between front- and back-of-house in our industry," said Laura Wade, co-owner of Onion City and its nearby sister restaurant, Misery Loves Co. "Some people are making a lot of money, and some people are not."

Charging Ahead

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• File: Luke Awtry
• Martini and two-piece chicken dinner at Onion City Chicken & Oyster

Onion City had another alternative model in place when it opened last August: a service charge. To combat fluctuating food prices and offset staffing costs, the restaurant added an 8 percent fee to every bill.

Service charges, typically ranging from 2 to 20 percent, are increasingly popular nationwide. But they can be both confusing and contentious for customers. Since they aren't regulated the same way tips are, these charges can help cover overhead costs or credit card fees, go to back-of-house employees, or even get pocketed by owners. It's up to the restaurant to be transparent — and truthful — about how they're used.

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• File: Luke Awtry
• The team at Onion City Chicken & Oyster

"It could just be built into the price of the item that we're selling," Wade said. "But the point isn't to bury it. The point is to say, 'Yo, running a small business is expensive,' and to create a talking point."

The charge didn't affect tips "a single bit" at Onion City, Wade said, but she chalks that up to strong community support. A few months in, once staff members had sorted out their systems, the restaurant dropped the service charge.

Wade would like to revisit the big conversations around tipping. "I think people are ready for change," she said, "but it's hard to be a trailblazer right now. It has to be gradual."

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• Chris Kesler of Black Flannel Brewing & Distilling in 2020

At Black Flannel Brewing & Distilling's brewpub in the Essex Experience, a 4 percent "kitchen appreciation fee" helps level the wage disparity between waitstaff and back-of-house employees. The fee supplements the base hourly rate for the restaurant's 14 kitchen staff members — including line cooks, dishwashers and sous chefs — bringing base pay from $16 to $18 per hour to $21 to $25.

Black Flannel implemented the fee in May 2021, roughly 10 months after opening. Founder Chris Kesler believes it has helped attract and retain kitchen staff. Initially, he said, servers were concerned that the fee would impact tips, but it hasn't. Average take-home pay, staff-wide, is $28 per hour.

Occasionally, a customer will complain about the fee and Black Flannel will refund it. "We're not trying to be sneaky," Kesler said. "But most people really appreciate that we're trying to do what we can to pay our employees more than a livable wage."

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• File: Oliver Parini
• Charred octopus at Black Flannel Brewing & Distilling

Some service charges take the place of gratuity, simplifying transactions for both parties. Woodstock cocktail bar Au Comptoir instituted a temporary, automatic 20 percent gratuity during the busy tourist seasons last summer and fall. Staff only received one complaint.

"We found it was convenient for the customer to just sign and go," owner Zoë Zilian said. "The feedback from the majority was that they were happy not to have to figure [the tip] out."

Raising Up

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• Courtesy
• Kelly Putnam of Lawson's Finest Liquids presenting a check to Sunshine Fund recipient Neck of the Woods

Karen and Sean Lawson decided to forego tips from the start when they opened Lawson's Finest Liquids' taproom in Waitsfield in 2018. They didn't want their staff's take-home pay to fluctuate with the season, snow conditions or shift.

Instead, they committed to creating living-wage jobs with annual salaries and full benefits. Karen Lawson declined to share the base pay for the taproom's "beertenders" but said the overall package includes health and dental insurance; an annual wellness benefit, which employees can use to purchase something important to them, such as ski passes or smoking cessation classes; 401k contributions; and even weekly on-site massages.

Making that financial leap could be challenging for existing restaurants, but the Lawsons incorporated those labor costs into their model from the start. Any amount customers leave on top of their bill is channeled into the brewery's Sunshine Fund.

Every two weeks, an organization goes "on tap" and receives 100 percent of customer donations. So far in 2023, Sunshine Fund recipients have garnered an average donation of $16,000. To date, Lawson's has donated $1.1 million to 80 Vermont organizations. The nonprofits don't know how much they're receiving until they're presented a big vinyl check in the taproom at the end of the month.

"There have been some presentations where staff have cried because it's such a joyful, powerful experience," Lawson said. "A $16,000 donation is incredibly impactful."

The model requires some explanation for new customers: Pamphlets and QR codes share more info, as do the beertenders during checkout. Occasionally, a customer will attempt to slide cash across the bar, but the beertenders are quick to return it.

"Word's kind of gotten out, though," Lawson said. "The guests get really excited about coming and supporting organizations, which is what makes it work."

Kayla Silver was inspired by Lawson's when she opened Salt & Bubbles Wine Bar and Market in the Essex Experience in 2021; she planned to pay staff $20 per hour and run a "fun-draising" program in lieu of tips.

"We didn't make it past soft opening with that model," Silver admitted.

During the first two nights of service, she saw just how much work her small staff was doing and realized the wage — which is closer to $18 per hour after taxes — wasn't enough. "And if it isn't enough to live, it's definitely not enough to be competitive," Silver said.

Salt & Bubbles now operates with a tip pool, guaranteeing a $25-per-hour average at the end of each pay period.

"The tipping side of things is really tricky," Silver said. "This industry struggles to be progressive in so many ways, but there won't be any progressive restaurateurs if we're so progressive we run ourselves into the ground."