Every industry has been impacted within the past six months, but service industries like restaurants, bars, and salons have been particularly hard hit. These industries predominantly employ tipped workers—and for many of these employees, their base salary can be quite low. It’s often tips that pay their rent. In 2019, 4.4 million Americans relied on tips to earn a living and two thirds of those workers were women. And even as the minimum wage has slowly crept up in other areas of the economy, there’s actually an entirely separate federal minimum wage for tipped employees, which varies from state to state. In fact, in 36 states the tipped minimum wage is less than $5 an hour.
As COVID has caused restaurants, salons, and other businesses that utilize tips to experience slow downs or shut downs, the employees that work there have suffered the consequences. What happens when business is slow, hours are reduced, and pay variances grow even wider from week to week? Fewer people are dining out or spending money on non-essential services these days, and workers who have relied on tips require extra support.
Helping Tipped Employees Achieve Financial Security
You can’t change your state’s tipped minimum wage laws. But you can find ways to better support your tipped employees. Tipped workers need faster access to their pay and better financial services to help them make ends meet in today’s economy. That’s where you come in. As their employer, you can act as the conduit for better financial security. Here are four ways you can support tipped employees without spending a dime.
1. Have open and honest conversations
People are struggling to make ends meet right now. If you anticipate needing to shut down your business for the winter or having reduced hours and additional furloughs, your staff needs to be aware of that as soon as possible so they can make a plan. Everyone has different circumstances to consider—they might be trying to manage virtual learning for their children, care for elderly parents, or work additional jobs. Communicate your plans with all employees as soon as you can so you can have an open dialogue about their options and give them time to prepare.
2. Grant workers earned wage access
An unexpected medical bill, car repair, or other unplanned expense can completely derail someone’s budget if they’re living paycheck to paycheck. This is especially true for people who work jobs that come with a lot of pay variance. For example, consumer spending habits have changed since this spring due to COVID. Many salons or spas saw a huge reduction in clientele due to fears of the virus. (I think many of us have sported hairstyles during quarantine that we were less-than-enthused about.) If tips represent a substantial part of their paycheck, and they encounter a period of reduced business, that’s a huge pay variance. COVID aside, even something as simple as a nice-weather week for someone working the patio at a restaurant can vary the next week when they’re met with sleet and wind. Trying to budget and plan expenses when you experience pay fluctuations like this is a huge obstacle.
Earned wage access can help address this challenge. If an employee encounters an unexpected expense or bill, they can access a portion of their earned wages ahead of time in order to cover their expense. There’s no pre-funding needed from you; with Branch we just need time and attendance files from you and we handle the rest. This ensures your employees can address their unexpected expenses without overdraft fees, seeking out a high-interest payday loan, or exacerbating the cycle of debt.
3. Encourage and promote tipping
Whether you run a restaurant, salon, or other service, chances are your employees are having to jump through many more hoops than normal to make sure your customers are satisfied, healthy, and happy. Anyone dining out or getting a service from a business with tipped employees should make generous tipping a priority. But we all know that’s not always the case. Encourage your patrons to tip with signage; you might have to explicitly state that your employees still rely on tips as part of their wages. You can also make digital tipping easier by prompting them before they swipe their card to select a tipping percentage.
4. Give employees instant access to tips or other one-off payments
Perhaps the most important thing you can do right now is pay your employees faster. If tips are a large portion of their income, they need access to those earnings as soon as possible. Don’t make them wait to receive their tips on their next paycheck. Grant them access to their tips instantly after each shift. It may sound like a hassle to issue one-off payments to your employees, but there’s no need to issue separate checks or go to the bank to make change for their tips each night. Branch allows you to digitally deposit tips, mileage reimbursement, and other one-off payments to your employees’ accounts instantly—even after each shift.
These are uncertain times, especially for people in the service industry. Fortunately, there are strategies you can use to help your employees weather the economic uncertainty many businesses are facing right now. Doing so not only benefits them, but helps ensure your business runs smoothly as well—and they’re all free for you to use. To see how Branch can help you manage tipped employees and keep business running smoothly, schedule a free demo below!