BAKERSFIELD, Calif. - Automatic tips for large parties at restaurants will soon be a thing of the past.
Starting in January automatic gratuity will be classified as a service charge instead of a tip. That means automatic tips will be treated like regular wages and subject to payroll tax.
“It looks like Uncle Sam has wised up and he’s going to get more money out of the service industry then he has already,” said Pedro Guerra, Food and Beverage Director at The Padre.
But the new rule by the IRS will cost servers who depend on their tips to get by.
“That’s how I pay for everything is tips. Pretty much none of it comes out of my pay check,” said Heather Cribbs.
Cribbs has been a server at The Padre Hotel for two years.
“I think secretly every server would gratuity every table if they could. I know that’s a horrible thing to say, but with larger parties you’re going to be very busy and it’s demanding when you have anything over six people. It is very time consuming.”
Guerra told 23ABC The Padre stopped automatic tips back in July to prepare for change. He said it has saved them some trouble, but he still knows the new rule will impact his servers.
“One thing I would like people to know is that most of these servers are students and those that are not generally are some kind of single parent."
Rich Jeffers, Spokesperson for Darden told 23ABC many Daren owned restaurants like Olive Garden and Red Lobster have also stopped automatic tips. Daren chain-owned restaurants stopped automatic tips in July at 100 restaurants. They are now testing a new system by suggesting tip amounts for customers and calculating the total for them on the receipt.