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NYC Restaurants Say Eliminating Tip Credit Would Be a Disaster For Restaurants and Their Workers

January 29th, 2024

88% of those Establishments Surveyed by New York City Hospitality Alliance Are ‘Extremely Concerned’ About Legislative Proposals to End the Tip Credit, Saying it Would be a ‘Disaster’ for Their Businesses

76% of Establishments Would Increase Menu Prices if the Tip Credit is Eliminated to Offset the Big Increase in Expenses to their Small Businesses, and 42% Would also Consider Eliminating Tipping to Keep the Overall Cost Down for Consumers

 67% Would Cut Staff; 54% Would Consider Closing A Business

87% said they would not vote for an elected official who supports eliminating the tip credit


NYC Hospitality Alliance Releases Report Highlighting Importance of Tip Credit to Restaurants and Workers; Report Makes Clear High Cost of Eliminating Tip Credit Will Lead to Closures and Lost Jobs

The NYC Hospitality Alliance today released a survey of 879 establishments across the five boroughs that found nearly all of them oppose eliminating the tip credit, which legally requires that restaurant workers earn the recently increased minimum wage while also protecting their ability to earn much more than the minimum wage with tips. 

The survey, conducted in December, found that 97% of restaurants were extremely concerned, or concerned, about eliminating the tip credit, with 88% saying it would be a disaster. Of the establishments surveyed, 95% said they support keeping the tip credit. If it were eliminated, 76% said they’d increase menu prices to offset the big increase in expenses for their small businesses, and 42% would also consider eliminating tipping to keep the overall cost down for consumers as much as possible - thus, eliminating the tip credit would result in more costly meals for New Yorkers and visitors and a loss of tip income for workers. 67% said they’d reduce the number of people they employ in New York State, and 54% said they’d consider closing a business in New York. A whopping 87% said they would not vote for an elected official who supports eliminating the tip credit. 

In addition to the survey, the NYC Hospitality Alliance also released a report today that showed how eliminating the tip credit will raise costs for restaurants and bars just as they’re starting to turn the corner after the COVID-19 shutdowns and mandates, it corrects misinformation being spread by anti-tip credit lobbyists, and explains how similar efforts in other states and localities have harmed restaurants and jobs and faced fierce opposition from restaurateurs and tipped employees alike. 

“It’s clear New York’s restaurants and bars rely upon the tip credit,” said Andrew Rigie, executive director of the NYC Hospitality Alliance. “There’s no reason for the state’s elected officials to upend the working model of New York’s restaurant industry and put small businesses and jobs on the chopping block, while making it much more expensive for New Yorkers and visitors to dine out in the Empire State.” 

Under current law, restaurant employers in NYC may pay workers who customarily receive gratuities a base wage of $10.65 per hour if that wage combined with their tips equals or exceeds $16 per hour, the current minimum wage. The $5.35 differential is the “tip credit.” The law requires tipped employees to always earn at least the full minimum wage, although, through this model, restaurant workers have been able to earn far more, with some reports showing they earn an average of $20 to $40 an hour. Some lawmakers in Albany are proposing eliminating the restaurant tip credit, which would pose a massive financial burden on the backs of small businesses.

The report released by the NYC Hospitality Alliance today sets the facts straight on the tip credit, including how no restaurant worker legally earns less than the minimum wage, and reviews data to show that tip credit jobs returned faster after the pandemic than non-tip credit jobs, sector job growth is stagnating in areas such as the District of Columbia where the tip credit has recently been eliminated, and the challenges restaurants and bars continue to face almost four years after the pandemic first struck New York City.