Restaurants may continue to suggest gratuities for large parties, but in order to distinguish between a tip and a service charge the payments “must be made free from compulsion” by customers.  The new rules mean that guaranteed tips essentially vanish when a server waits on a large party.  But does this automatically mean that the server is making less money?  Interestingly, A Good Egg Dining Group out of the Oklahoma City area says not necessarily.  The company kept track “for three months to see how it was actually affecting the servers,” and overall discovery was that they ended up making more without the automatic gratuity.  While there were some situations where the server received less than when the tip was added to the total bill, on average they earned more tip money from the larger parties.

A Good Egg is happily complying with the new law, but there are other restaurants who feel put out by it.  Implementation requires employers to keep track of these tips given to their wait staff, and then manage the money that would normally be cashed out on a day-to-day basis.  They must then ensure that the server receives the gratuity when the pay period rolls around.  Another option is to simply abolish the automatic gratuity policy and take the chance that their wait staff may not be compensated for their efforts.  One restaurant owner feels that the IRS changes aren’t sensitive to the “inherent operations and labor conditions of the industry” and that “the IRS’ broader objective should be to make sure people are paying taxes on their income” without having to micromanage how restaurants work.

Whether you agree or disagree with the new rules, though, is irrelevant.  Full enforcement began January 1, 2014, and the IRS plans to crack down on the gratuity income of servers in 2015.

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