Automatic gratuity is a hot topic in the world of dining and hospitality. Some people love it, some people hate it, and many people are simply confused about it. But what is it exactly? And why should you care?
In this article, we’ll dive into the ins and outs of automatic gratuity, from the legal implications to the best practices for implementation. We’ll also explore the pros and cons of this tipping trend and its potential impact on the dining experience.
What is Automatic Gratuity?
Automatic gratuities, also known as a service charge or mandatory tip, is an employer policy that some restaurants and hospitality businesses use as an automatic service charge. This percentage is usually around 15-20%, but it can vary depending on the restaurant’s tip policy.
Automatic gratuity is different from traditional tipping in that it is a mandatory charge, rather than a voluntary payment. This means that customers do not have the option to decide how much to tip, or whether to tip at all for the provided service.
What Businesses Should Implement Automatic Gratuities?
Automatic gratuities can be especially beneficial for businesses that serve large parties or that have a high turnover rate of customers. Another one of their key benefits is to ensure that employees are compensated fairly for their work, regardless of how well they are tipped by individual customers.
Businesses that should consider implementing auto gratuities include:
- Restaurants
- Bars
- Coffee shops
- Hotels
- Spas
- Salons
- Valet parking services
- Tour companies
- Any other business where customers typically tip their servers
Is Automatic Gratuity Legal?
Yes, automatic gratuities are legal in the United States. However, there are a few things that businesses need to keep in mind.
- First, businesses must disclose their automatic gratuity policy to customers in advance. This can be done on the menu, on a sign at the entrance of the restaurant, or verbally by the server. Using legal templates for these disclosures can ensure compliance with all relevant regulations.
- Second, automatic gratuities cannot be used to reduce the minimum wage that employers are required to pay their employees.
- Finally, customers are not required to pay automatic gratuities if they are not satisfied with the service they received. However, they may be asked to leave the restaurant if they refuse to pay.
Pro Tip
For businesses that are considering implementing automatic gratuities: Be transparent with your customers about your policy and make sure that your employees are properly trained on how to explain the policy to customers and how to handle any complaints.
Plus, make sure that as the restaurant owner, tips are fairly distributed to staff and that you follow the fair labor standards act and other federal laws, which you can learn more about here.
How to Write an Automatic Gratuity Policy
Automatic gratuity policies can be a great way to ensure that your service staff is compensated fairly for their work, regardless of how well they are tipped by individual customers. However, it is important to write a clear and concise policy that is fair to both your customers and your staff.
Here are a few tips:
- Decide on a percentage. Automatic gratuity is typically around 15-20% of the bill, but you can choose a different percentage if you prefer.
- Choose who to charge. Some restaurants charge automatic gratuity for all customers, regardless of the size of their party. Others charge it only for large parties. You can also choose to charge it for certain types of events, such as banquets or weddings.
- Allow customers to opt out. It is a good idea to allow customers to opt out of automatic gratuity if they are not satisfied with the service they received. However, you are not required to do so.
- Communicate your policy clearly. Make sure that your customers are aware of your automatic gratuity policy before they dine at your establishment. You can do this by including it on your menu, posting a sign at the entrance, or verbally informing customers when they are seated.
Here is an example of an automatic gratuity charge policy that you can use as a template:
Auto Gratuity Policy
At [restaurant name], we automatically charge a gratuity of 18% to all large parties of 6 or more guests. This gratuity is shared among our servers and other staff members who contribute to your dining experience.
If you have any questions or concerns about our automatic gratuity policy, please do not hesitate to speak to your server or manager.
Once you have written your automatic gratuity policy, make sure to train your staff on how to explain it to customers and how to handle any complaints.
How to set up Automatic Gratuity Charges?
There are a few different ways to set up automatic gratuity with service charges, depending on your point-of-sale (POS) and food ordering system.
Most restaurant POS systems have a built-in gratuity feature, which gets clients to pay automatic gratuity. To set it up, you will typically need to:
- Log in to your restaurant management system.
- Go to the settings menu.
- Find the automatic gratuity section.
- Enter the percentage of the bill that you want to charge for automatic gratuity.
- Select whether or not you want to charge automatic gratuity for all customers, or only for large parties or certain types of events.
- Save your changes. If you have a restaurant mobile app, then these changes are affected there as well.
Once you have set up automatic gratuity charges, you will need to communicate your policy to your customers.
You can do this by including it on your menu, posting a sign at the entrance to your establishment, or informing customers when they are seated or via restaurant marketing software. Here are some additional tips for setting up automatic gratuity charges:
- Make sure that your automatic gratuity policy is fair and consistent.
- Be transparent with your customers about your policy.
- Allow customers to opt out of automatic gratuity if they are not satisfied with the service they received.
- Train your staff on how to explain the policy to customers and how to handle any complaints.
Pro Tip
When setting up automatic gratuity charges:
- Make sure that your automatic gratuity policy is fair and follows automatic gratuity laws.
- Be transparent with your customers about your policy.
- Allow customers to opt out of automatic gratuity if they are not satisfied with the service they received.
- Train your staff on how to explain the policy to customers and how to handle any complaints.
Frequently Asked Questions (FAQ)
What is the meaning of auto gratuity?
Automatic gratuity means it is a mandatory charge, rather than a voluntary payment. This means that customers do not have the option to decide how much to tip, or whether to tip at all.
Automatic gratuity is often used for large parties, as serving a larger table can be more time-consuming and labor-intensive for the server. Additionally, businesses that pay employees minimum wage or below may implement this as a main source of income for staff. Some businesses choose to implement automatic gratuity for all customers, regardless of the size of their party.
Do you tip on top of automatic gratuity?
Although suggested tips should be from 15%-20% of the entire bill, tip amounts can vary. Clients who leave an additional tip usually leave less than that.
How does gratuity work?
Gratuity is also common in other industries, such as hotels, taxis, and salons. The amount of gratuity that is customary varies depending on the industry and the country.
