Every industry was transformed by the pandemic, but service industries like restaurants, bars, and salons were particularly hard hit. These industries predominantly employ tipped workers—and for some 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.
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.
Helping Tipped Employees Achieve Financial Security
With the cost of living continuously on the rise, tipped employees in service industries are struggling to make ends meet. 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 stay afloat 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
Each of your employees has different circumstances to consider—they might have young children in daycare, care for elderly parents, or work additional jobs. Communicate with your employees about their individual circumstances and lives outside of work so you can understand their financial or mental strains. When you show you care for your employees, they're more likely to be honest about what they need and view you as their partner instead of continuously looking for work elsewhere.
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. If tips represent a substantial part of their paycheck, and they encounter a period of reduced business, that’s a huge pay variance. 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.
To learn more about supporting and retaining tipped workers, download our free guide!
