A CHECKLIST
Fair Tipping for Guests
What you should know about fair tipping as a well-meaning guest or patron of a hospitality establishment.
Fair tipping practices for Guests means:
Leaving a tip that reflects the service and your appreciation
Your tip always goes to the hard-working employees, not the business
Your tip will be divided amongst those employees in a tip division structure that they themselves decided
Management and ownership cannot make decisions on the division of tips
Management and ownership are not allowed to take a portion of the tip except for cases in which they also participate in service work
For example: A chef who is also a part owner of the restaurant may receive tips for their work in the kitchen
Look for the yellow square
The FairTips.ca window sticker is given to participating restaurants who are committed to implementing and maintaining fair tipping practices at their location.
FAIR TIPPING PRACTICES
Fair Tipping for Employees and Businesses
How can your place of work (or the business you own) ensure and maintain fair tipping practices for employees?
Fair tipping practices for Employees and Businesses means:
Respect for the customer and their gratuity
Tips always go directly to the tipped employees according to the tip division model they decide for themselves
Management and ownership are prohibited from earning tips except in the case they participate in server work (such as a chef who is also part-owner)
The tip division model is transparent and known by all employees
Atlas recommends printing out a poster in a visible spot in the employee area of your establishment
Knowing the difference between the two officially recognized tipping models in Canada:
1) Direct Tips
Voluntary
CPP & EI EXEMPT
Direct tips qualify for CPP & EI exemption, saving both the employee and business up to 7.5% on tips each!
Voluntary means the customer had the option of not tipping, in addition to the usual percentage options
This group is representing the best interest of all tipped employees (often referred to as a Gratuity or Tip Committee)
Such as monthly tip report
These tips are not recorded on payroll
2) Controlled Tips
MANDATORY
CPP & EI REQUIRED
Controlled tips are not exempt from CPP & EI.
This means both the employer and employees must contribute CPP & EI - each party 7.5% of the tips generated.
Controlled tips are mandatory tips the customer is required to pay, such as auto-gratuity for large groups, etc. Mandatory tips are considered a service charge, so employers must also charge sales tax (HST/GST) on them.
Such as monthly tip report
If you are an employee you can calculate your savings by switching to a Direct Tip model with our employee calculator.
If you are a business you can calculate your savings by switching to a Direct Tip model here.
The elephant in the room
RAZOR THIN PROFIT MARGINS
The benchmark for restaurants is to generate 10% in profits. However, even before the pandemic the national average was below 5%. Last year, the average profits were 2.8%.
With the rising costs of food & alcohol, inflation, antiquated distribution and costs, labour shortages, and increased confusion around taxes as we transition to a digital economy almost all hospitality sectors have a seen a steep decrease in profitability in recent years.
CHANGE COMES FROM ABOVE
Currently in Canada (and many other countries) the tipping model is legally built into the compensation system of hospitality workers. If tipping disappeared today, many workers would face immediate financial hardship. Tipping directly supports the people bringing you your meal, mixing your drinks, and carrying your bags.
A RISKY BUSINESS
Many service roles offer part-time or unstable hours due to the nature of the hospitality business. Struggling to keep up with the ebb and flow puts many workers in a precarious position financially, and they rely on tips to help see them through these trying times.
RESTAURANT VISITS
23M
(Restaurants Canada)
PROFITS
2.8%
All time low restaurant profits in 2024
(Restaurants Canada)
WORKERS
(Restaurants Canada)
LOW GROWTH
(Restaurants Canada)
KNOWLEDGE
of Canadians do not fully know how their tips are distributed
The least aware of how their tips were distributed were in Alberta (Just 38% of respondents)
BUSINESSES
Contact Atlas for a free consultation - click here
We handle setup, automate division and distribution, and send tips directly to employees’ bank accounts
EMPLOYEES
Fill out this form and we’ll contact your employer - click here
If they sign up, you receive $500 through our Atlas Champions referral program.
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