When Seattle’s tip credit expires in 2025, will tips end as well?

Seattle restaurants are sounding the alarm about the economic cliff they’re facing. For years, businesses have been able to apply customer tips toward worker pay. But the tip credit will expire at the end of the year, just as Seattle’s hourly minimum wage for all businesses increases to more than $20 in January. Businesses expect big changes ahead that they say will affect the customer experience. Could it be the end of tipping?

The tip credit debate has been a running battle at City Hall for months now. Restaurant owners had hoped Mayor Bruce Harrell would intervene and extend it. But those hopes were dashed when he announced the tip credit will expire.

Anthony Anton, head of the Washington Hospitality Association, expects dire consequences.

“Overnight many of our beloved restaurants are going to see a 20 percent increase in their labor costs, one of the largest mandated increases in state history,” Anton said. “And this is going to happen without a public conversation.”

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In a statement announcing his decision, Mayor Harrell says he’s committed to addressing the pressures facing small businesses, including the absence of a tip credit.

An alternative approach

Earlier this year, Seattle restaurateur Ethan Stowell did away with tipping altogether. Instead, customers pay a service charge that helps pay for workers’ hourly rate, health care, and other benefits.

“I never liked tipping,” said Stowell, who’s been in the restaurant business for nearly 30 years. He says he supports the minimum wage going up, and restaurants will have to change their compensation model in response.

“I don’t think that a customer should dictate how much one of our employees gets paid," he said. "It’s also a big pain to deal with.”

Stowell says every restaurant has a different approach to how to split the tips, and who shares in it, and so forth.

At Rione XIII, one of Stowell’s restaurants on Capitol Hill, manager Elie Moorman remembers when the new service charge took effect. She says it was an adjustment for everyone, especially on a busy night like Valentine’s Day.

“On that night it was really difficult especially for everybody because it was this brand new thing," Moorman said. "To be like, ‘Oh, man, I’m making the same as every day even though I just got absolutely run ragged from open to close!”

But soon, staff came to appreciate the advantages.

“Everybody really, really loves it on a slow day,” Moorman said. “Everybody’s like, ‘Yeah! I’m making my normal wage even though we’ve had 10 tables and probably won’t get more because it’s rainy and gross outside.'”

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It’s not clear how many other businesses are adding service fees. But Charlie Anthe, owner of Moshi Moshi, a Japanese restaurant in Ballard, is skeptical it’s the right remedy.

“We know that customers hate them," Anthe said. "I’m not a fan of them either. And they do have interesting tax implications as well.”

Anthe also heads the Seattle Restaurant Alliance, an industry group. He says his members might resort to some form of service fees.

“At the end of the day, we have to somehow make up for this added cost and find a way to make the math work,” he said.

Mixed reaction from public

Many listeners like Karen Campbell responded to a KUOW social media callout, saying they’re not fans of service charges. She also considers tipping an optional reward for exceptional service.

“I’m seeing where tips are expected rather than earned,” Campbell wrote. “And now the restaurateurs are considering part of an employee compensation. It all just seems wrong.”

Ovidiu Platon wrote that menu prices should reflect the cost of ingredients, employee wages, and all that’s associated with running a business.

“Restaurants don’t ask me to pay their rent or their utilities separately," Platon said. "Why does it make sense for customers to pay employee wages separately?”

Some commenters suggested raising prices. But many businesses say they already have. They’ve also made adjustments like reduced hours and staffing. But they say that hasn’t been enough, and they’re running out of options.

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