Is the Commission Pay Model Right for Your Restaurant?
Full-Service Restaurants
The $15 minimum wage was passed in Florida in November 2020 (Amendment #2). By 2026, minimum wage in Florida will be $15/hour and tipped minimum wage will be $11.98. That ‘s a 75% increase in minimum wage and 116% increase in tipped minimum wage.
For full-service restaurants, the increase in tipped wages alone can easily be $500,000 for an average restaurant.
Is your restaurant prepared for this type of wage increase, on top of the inflationary cost of food and supplies? Have you prepared your plan to manage these increases? Does your planning include consideration of the service charge? How about the service charge combined with commission compensation for servers and bartenders?
The commission model for compensating servers and bartenders is an alternative that has pros and cons. It can make the service charge an effective way to manage wage increases while retaining owner profits. Proper implementation requires financial modeling and analysis. Wage and hour compliance and human resource matters also must be considered when evaluating this compensation model. Other factors that are part of the analysis include:
- Which employees qualify to be paid as a commissioned employee?
- How do commissioned employees qualify to be exempt from overtime pay?
- What is the financial impact of losing the FICA Tip Credit?
- What is the right commission to pay?
- What is the right service charge to use?
- Can employees receive commission pay plus tips?