How A Tip Credit, Or Lack Thereof, Could Impact All Of Us

How a tip credit, or lack thereof, could impact all of us

HONOLULU (KHON2) — Should the state eliminate the tip credit? A new bill, SB214, is pushing to phase out the credit for employers, which would then require them to pay tipped employees minimum wage. One law maker said it’s only fair, but others believe it could put restaurants out of business.

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Valets, nail technicians, waiters and bartenders are all jobs heavily reliant on tips. Businesses with tipped employees currently get a tip credit, allowing them to reduce the minimum wage they pay those employees.

“In order for them to do that, the employee has to be making at least $7 an hour in tips, in net tips over the minimum wage,” Hawaii Restaurant Association Board Director Tom Jones explained.

But Sen. Kurt Fevella is pushing legislation to gradually phase out the tip credit, which would then require businesses to pay tipped workers minimum wage.

“At the end of the day, we need a good living wage,” Fevella said. “And right now, working under minimum wage as a waitress or waiter or any kind of tip penalties that people have is is not even close to a living wage.”

Those in the restaurant industry said tipped employees often rack in hundreds of dollars a day in tips.

“Servers in most restaurants would earn two, three and even four times the minimum wage in tip income,” Jones explained.

And he said the tip credit allows restaurants to pay other positions more.

“So we can direct those funds to dishwashers and cooks and people in the back of the house that are not directly tipped employees.”

If the bill passes, many said it would hurt their bottom line.

“At some point there’s a breaking point and I’m worried that this bill is really going to hit a lot of restaurants,” Ruby Tuesday owner Rick Nakashima explained. “There’s a big reason Outback closed all five restaurants last year, and we closed two in the past year and a half.”

Nakashima said they’re still getting over the pandemic, and he’s not alone.

“We have labor shortages. We’ve got higher utility costs. We have higher insurance costs,” Jones added. “More than any other industry, restaurants have been struggling for the last five years recovering from COVID, and it’s a real challenge.”

“These guys want their profit margin to be so big so they constantly stand on the little man,” Fevella said. “So I have no sympathy during COVID, because everybody wants to blame COVID. But what about the families that is struggling to make ends meet?”

Nakashima said this could also have a trickle down affect.

“I think a lot of restaurants will try to pass it on to the customer,” he explained.