By David Hopkins
Ontario’s minimum wage is going up again on January 1, 2022. And this time, unlike in the past, the minimum wage for servers will also rise significantly. It is set to increase almost 20 per cent, from $12.55 to $15 per hour. This comes at a time when most restaurants are trying to get back on their feet after what has been an incredibly challenging 18 months.
As much as I support increasing minimum wages, the timing is not ideal for struggling restaurateurs. As wages go up, so too must the price that the customer pays. So, with this wage increase, we expect to see restaurant menu prices go up even more than they already have throughout the pandemic.
We are in favour of price increases throughout the industry and agree that as higher expenses are forced upon operators, the revenue must come from somewhere. However, this new minimum wage increase does give the opportunity to distribute more of the wealth fairly across the industry positions.
Servers are poised to significantly benefit from this wage increase for several reasons. First, they are getting an almost 20 per cent increase in their wage. But, secondly, with recent price increases and even more to come to help offset the wage increase, server tips are going up dramatically. If a consumer tips 15 per cent on a $100 bill ($15) and that bill goes up to $115 because of price increases, that same server is now getting a $17.25 tip.
Some would argue that guest tipping will go down because of the wage increase, but I think that is very unlikely. Yes, those in the restaurant industry are aware of the wage increase, but most of the public don’t realize that servers have been on a lower wage structure or that they are now getting a substantial increase. Most consumers have no reason not to continue tipping as usual (and these tip percentages have been going up since the start of the pandemic).
So, for restaurants, this is an excellent opportunity to redistribute the wealth a bit more – especially during a time when finding back-of-house positions is incredibly challenging.
Servers typically pay a “house tip-out” that gets redistributed to other hourly staff, such as cooks and hosts. With servers potentially making 15 per cent to 20 per cent more across the board right now than they were a short time ago, it is a great opportunity to increase this tip-out distribution and allow other staff members to benefit from this change – not to mention help restauranteurs with the challenges of finding and retaining staff.
David Hopkins is president and founder of The Fifteen Group, a leader in restaurant profit maximization. With offices in Toronto and Vancouver, The Fifteen Group has helped over 1,000 restaurants achieve their profit goals.