Restaurants are a driving force in Georgia’s economy. They provide jobs and build careers for more than 375,000 Georgians, 10 percent of the state’s workforce.
Georgia’s restaurants serve thousands of meals daily across more than 16,000 locations with tipped and non-tipped business models. Historically, along with flexible work schedules, the opportunity to see the direct result of good service and hard work is what makes a server an attractive profession, and the restaurant industry, an industry of choice for many.
Tips and service charges are customary within the industry. That is why clarity and consistency in tips and service charges are important for employers, employees and patrons.
In June 2012, the IRS issued a ruling to update the treatment of gratuity payments, specifically to delineate when they should be treated as tips versus service charges. While this IRS action does not change the law or initiate new policy, the ruling implies enhanced enforcement of issues related to tips and service charges. We expect some restaurateurs may, as a result, re-examine how they handle automatic gratuities in light of the rule that takes effect Jan. 1.
By the same token, this is not a new policy. The ability for restaurateurs to determine automatic gratuity practices in their establishments has not changed in any way. The result of the ruling may simply be business as usual at Georgia’s tipped restaurants.
Regardless of how restaurateurs respond to the IRS ruling, it is critical that they maintain the flexibility to implement policies that make the most sense for their business, workforce and customers. In the restaurant and hospitality business, quality and service are everything. Maintaining a culture that puts a premium on those values, and doing so by preserving restaurateurs’ freedom of choice in regard to their tipping and automatic gratuity policies, is of utmost importance to the industry.
The restaurant industry has worked for years alongside the IRS to ensure accurate tip reporting by the millions of employees in the profession — more than 13.1 million nationwide in tipped and non-tipped environments. The industry is committed to continue to do so.
Ultimately, the decisions restaurateurs will make now and well into the future regarding their tip and automatic gratuity policies will be what they view as having the greatest benefit to Georgia restaurants, our employees and our patrons. That’s exactly how things should be in our service-driven industry.
Karen Bremer is executive director of the Georgia Restaurant Association.
