Cash_Tip

Why You Should Tip With Cash — And Only Cash

So don't forget to hit the ATM before the next time you go out to eat — or get someone to bring your food to you

Recently, Rep. Alexandria Ocasio-Cortez did a little bartending to raise awareness for upping the federal minimum wage — still $2.13 an hour, unchanged since 1991 — for tipped workers. A former bartender herself, she slung drinks and slices of pizza at a New York restaurant to point out the deep indignities of underpaying service workers, not just in the struggle to make ends meet, but in the way it keeps tipped workers vulnerable and dependent, and more likely to put up with bad working conditions. Women especially are three times more likely to live in poverty working in the industry, and harassment complaints in the restaurant world are five times that of any other industry.

“Any job that pays $2.13 an hour isn’t a job, it’s indentured servitude,” she said. “All labor has dignity. And the way that we give labor dignity is by paying people the respect and the value that they’re worth at minimum. We have to make one fair wage, and we have to raise the national minimum wage to $15 an hour, nothing less.”

But until that gets sorted, one powerful way to slap some dignity on the table is, whenever possible, to plunk down your tip in cash every time, all the time.

Tipping in Cash Means Money in Your Server’s Pocket This Very Minute

“The way our payroll works, I get my credit card tips about 10 days after,” explains Alex, a server in New York at a fancy restaurant that goes for about $30 a plate. “Some nights I don’t get cash, and it kinda sucks. Right now, I’m coming back from a two-week vacation because the restaurant was closed. I’m hoping for cash tonight, because if I don’t get it, I’ll go another 10 days without a paycheck, and I’ve already gone two weeks.”

Admittedly, Alex, who’s been in the industry for about 12 years, does say that when he worked in more corporate restaurant settings, like at Red Lobster, he was paid out in cash for his credit card tips each night. “But that requires a lot of cash on hand,” he adds, something smaller operations aren’t likely to have.

Paying on a Card Could Mean the Server Gets Less of the Tip

Some restaurants will take the credit card service fee, which can be 2 to 3 percent of the bill, out of the server’s tips, which means when you tip on plastic, the entirety of your generosity may not even go to the person you feel earned it.

It Could Also Mean Their Tips Go to Other Workers Not of Their Choosing

Some restaurants require servers to tip out the hostess, bartender, bar back and bussers from their own tips, but they may do so automatically by a computerized algorithm that comes out of the server’s credit card tips (even if the server wants to or not — or doesn’t think they’ve done a good enough job to be rewarded). That’s bad enough, but if the server doesn’t have cash, it also means they don’t have the funds to overtip certain workers who really helped them out — e.g., a particularly attentive bartender or hustling busser.

Alex says his restaurant allows him to tell the hostess at the end of the night what he’d prefer to tip the busser from his credit card tips. But again, that still means everyone’s waiting 10 days to get paid.

More Cash Means Lower Taxes

Servers are supposed to claim all tips in any form of currency on their tax returns, but by putting the cash in their hand, you’re effectively giving them the leeway to figure that out for themselves. Is it ethical for them to not claim all the tips? Depends on whether you believe they have the right to square away what they need to live in a volatile, tenuous industry with extremely high turnover that routinely underpays them and steals their wages.

In an informal survey on Facebook, I asked tipped workers if they’d prefer all cash tips, and responses from a bartender, musician, pizza delivery guy and furniture delivery guy were pretty much unanimous: Less money you have to tax, more money in your pocket. As the Salty Waitress wrote about this very issue:

“We’re taxed on how much we take home in tips, so it’s in servers’ interests to lower the amount they declare. If you’re netting on average 20 percent, you might only declare 12 percent of cash tips on your year-end taxes. Oh, you’re offended by the suggestion of ‘tax evasion’? Look, I’m just telling you how it is. Don’t shoot the messenger.”

“It does put the responsibility on us for paying our taxes, if either the restaurant reports cash for you or leaves it to you to report your cash,” Alex explains. “But it makes our life so much easier to have cash. We can put it in the bank, and do what we need to do with it.”

There Are, However, Two Instances Where You’d Be Better Off Tipping on Plastic

All two:

  1. If you don’t have enough cash to tip the full amount you’d prefer, use credit. Also, don’t go using cash to justify stiffing a server the full 20 percent you ought to pony up for the luxury of dining out.
  2. Leave it up to your server. If they don’t pay any credit card fees out of their tips, and they cash out at the end of the night, or otherwise don’t care which way their tips roll into their bank account, credit is probably easier.

Otherwise, Cash Is King

“You wouldn’t hear one person complain about it,” Alex tells me when I ask him what would happen if everyone tipped cash all the time. “Well, maybe the IRS.”