Get Ready Michigan: Restaurants Now Adding ‘Labor Fees’ to Pay Tipped Workers

As businesses battle to stay afloat and pay staff competitive wages, some are getting creative and tacking on extra charges to customers' bills.

One example is a restaurant in Northern Michigan that has recently begun adding 'Labor Fees' to guests' checks in order to bring tipped employees' wages up to what the restaurant owner calls "livable wages."

Adding a Transparency Fee

The Iron Bay restaurant in Marquette is not trying to disguise the practice - the restaurant is adding a 4% labor fee to each customer's check and referring to it as a 'transparency fee.'

Andrew Hilary is the General Manager and establishment owner. He tells WLUC-TV that he tries to reward employees for their longevity by giving them pay raises when they reach milestones.

“Our goal is to always give someone a dollar raise if they stayed for a year, and once they are here for a year and a half or two years, we try and bump that significantly as a ‘thanks for staying so long,’” Hilary tells the TV station.

He goes on to say that because of the restaurant's location, the amount of money servers make can vary greatly from day to day.

Pricing Policy Benefits Customers

Hilary notes that he's fielded a lot of questions and comments after someone posted about the fees on social media. He says that adding the fee instead of increasing menu prices is a benefit to customers.

“There are a couple of issues with just raising the menu price. If you are tipping based off percentages, that percentage is higher because I put more money on the menu,” Hilary said. “The other piece is tax. We all pay 6% tax when we go to a restaurant. So, if I increase the menu for that purpose, you are also getting taxed on that.”

 

What are your thoughts?

Are labor fees or transparency fees just part of the price of going out to eat? Should restaurants implement mandatory tipping policies or add fees for paying with a credit card?

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