The NYC Hospitality Alliance and the NYS Latino Restaurant, Bar & Lounge Association were recently invited to the State Capitol in Albany to explain to lawmakers how devastating eliminating the Tip Credit would affect small businesses and jobs. Here is what they said:
THE COST TO RESTAURANTS AND BARS: If the tip credit is eliminated, it will cost about $12,000 more to employ one full-time tipped employee. Do the math - what would it cost your business? This increase will be devastating for small restaurants, costing tens or hundreds of thousands of dollars yearly, and millions of dollars for larger ones. These costs are simply untenable for hospitality businesses.
WHAT BUSINESSES ARE SAYING: To manage the massive financial loss of the tip credit, 76% of NYC restaurants surveyed said they’d increase menu prices 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, reducing worker income. Eliminating the tip credit will also make dining out at restaurants even more expensive at a time when inflation and financial issues are a top concern for New Yorkers.
WHAT WORKERS ARE SAYING: A recent survey of tipped workers in New York revealed that 84% believe the current tipping system works well for them, and 88% want to maintain the current system of a base tip wage and tips. The tip credit compensation model has enabled countless New York workers to earn more than the minimum wage, with many reports showing an average of $20 - $40+ per hour.
ELIMINATING THE TIP CREDIT HAS BEEN A DISASTER IN OTHER STATES: The Tip Credit was eliminated in Maine and the state’s lawmakers later reinstated it after hearing from tipped workers and restaurant owners who were outraged. In Washington D.C. they began phasing out the tip credit, and have seen major job losses, restaurant closings, confused consumers, and the D.C. Council recently held an oversight hearing to investigate how to address all these negative consequences. Last year, voters in Massachusetts rejected a ballot measure to eliminate the tip credit. In 2025, Michigan reversed tip credit elimination when the Governor signed a law to restore and preserve the tip credit after outcry from restaurant owners and workers. And in states like California and Washington, two of the few states with NO tip credit, many restaurants are struggling, and there is a desire to implement a tip credit.
Elimination of the tip credit continues to be a hot issue for employers and employees alike. If you have questions about a tip credit issue, call the attorneys at Pechman Law Group 212-583-9500.
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