Increasing Tip Credit Would Raise Wages in Hawaii Restaurant Industry

Thomas Jones
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Thomas Jones

BY THOMAS H. JONES – I and my fellow restaurateurs would have been paying all our dishwashers and kitchen help well over $9 per hour years ago if the state minimum wage law allowed for a reasonable tip credit. The Hawaii State Legislature’s failure to consider tip income as part of a tipped employee’s full wages is the reason so many restaurant industry back of the house employees wages are so low.  The Hawaii Restaurant Association has submitted realistic tip credit bills to the legislature year after year with no results.  When will the legislators realize that increasing the tip credit will have little impact on the total income of tipped employees and allow restaurateurs greater latitude to pay the kitchen staff much higher wages?

Not taking at least 25% of tip income into account when calculating minimum wage for tipped employees is irresponsible, if our legislators’ intent is to increase the working class wages above minimum wage. For the past 3 decades, Hawaii’s minimum wage law has forced employers to increase the pay of the many highly tipped employees at the expense of those who wash the dirty dishes.  Failure to increase the tip credit provision of the minimum wage law is counterproductive to helping restaurant owners to increase the wages of all their employees above the minimum wage.


The Governor stated that 19 other states have higher minimum wages.  Well, 28 states have the same $7.25 per hour minimum wage. So we are currently in the majority on that point.  Interestingly however,  19 states have per hour tip credits of $5.12 to $5.48, 5 states have tip credits of between $4.36 to $4.98, 13 states have tip credits of $3.00 to $3.99, 5 states have tip credits of $2.25 to 2.90; while Hawaii’s tip credit is 25 cents.

Some 42 states recognize that tipped employees do not need the same minimum wage as untipped employees as long as they make up the difference in tips. The HRA has asked for a tip credit of not more than 25% of the hourly tips claimed by the employee as tip income and an employer paid wage of not less than $5 per hour. That means that a tipped employee being paid a tip credit wage of $5 per hour ($7.25  less $2.25)  by the employer would have to be making at least a combined $14 per hour in tips and the employer paid “tip credit minimum wage” ( $5 wage + $9 in tips).  Does a $2.25 cent tip credit against a guaranteed $9 per hour tip income sound unfair? That is still well below the norm for tip credits nation wide.

Gov. Neil Abercrombie has spoken with pride that he worked in the restaurant industry as a waiter in his youth. Therefore, he knows first hand how much tip income servers can make.  It would be really something if the Governor could explain this to the State House and Senate members and help restaurateurs pay more than his proposed $8.75 to kitchen workers without increasing the minimum wage. The HRA has been trying since the 1980’s to get the legislature to help its members pay their kitchen employees a maximum wage.

We really would not need a minimum wage if the legislature would stop monkeying around with the economy.

Thomas H Jones is the President of the Hawaii Restaurant Association





  1. You're an idiot! Unless you add an automatic 25% gratuity to every check, you have no way of guaranteeing that a tipped employee will even get a gratuity on a check. You want to deduct money from a minimum wage paycheck for a credit that may not even exist. Just so you know, Hawaii is a tourist destination. People come from all over the world. In many countries (where the minimum wage is more than $15.00/hr american for retail and hospitality positions) and health care and child care and education including college is available to every citizen of that country, tipping is not a custom. When people from countries dine and drink here they often times tip nothing. Of course they are horrified to find in a civilized country that employers are allowed to charge $35.00 for a steak and $20.00 for a glass of wine but only pay an hourly wage that is below the poverty level of every civilized country in the world and that many employees have little or no vacation (as opposed to the 4-6 weeks minimum that many employees enjoy in other countries), little or no health benefits, no pension or retirement plan (no matter the length of service by loyal employees) or any of the other benefits that workers in other countries get as a matter of routine.

    Labor costs are an extremely important aspect in running any successful business. Every hourly employee knows that if the business they work for is unsuccessful that they will lose their job. But if you think paying someone $4.00 or $5.00 per hour assuming that tips are guaranteed to cover the rest then you should wait or bus tables or bartend to feel the frustration of offering excellent service to every guest (as you require) only to receive nothing at the end of that service. Oh and make sure you do that at the 2 and 3 jobs you will have to work just to survive in Hawaii.

    How about quit your whining, take a pay cut and pay your employees a living wage. Or just add an automatic 25% or 35% gratuity to every check and see how soon you go out of business. I bet not one single of your fellow restauranteurs lives on $7.75/hr. Take a look at the lines outside of every restaurant in Waikiki every night. Take a look at the record numbers of tourists paying top dollar to dine at your restaurant. Take a look at the person washing your dishes, mopping your floor, serving and cooking your food. Then take a look in the mirror and do the right thing.

    • Dennis,

      With all due respect, I can easily demonstrate, from credit card receipts, that servers at our three restaurants earn on average $22.50 per hour in tip income, before we pay the "cash wage" of $7/hr ($7.25 less the 25 cent tip credit. Some earn as much at $28/hr. This is fact.

      At that same time, we start our dishwashers at $8/hr and most are earning $8.50 or more. That is more than $1/hr over the current minimum wage. If we didn't have to pay servers $7/hr we could pay the dishwasher and other kitchen staff even more. More fact.

      You are right, I do not earn $7.75 an hour. If I did, I could not qualify for the loans and credit necessary to build and operate the restaurants that create jobs for over 200 employees. All of those jobs pay over $7.75, especially when tip income is considered. Most of our employees work enough hours to qualify for health insurance coverage and we also offer a 401K with an albeit modest employee matching contribution.

      We pay over 4,000 hours of server wages each month at $7/hr and the servers average $22.5 in tips. That comes to $118,000 in server income alone, before benefits.

      I started my career in the restaurant industry over 40 years ago as a dishwasher and have worked every job in the front and back of the house. Your comment seems to imply that I am out of touch with my employees. Nothing could be further from the truth. I know first hand what they do everyday.

      With respect to your "take a look in the mirror" comment; if the state legislature would increase the tip credit to 25% of the tips that a server actually claims as income on an hourly basis (not some arbitrary or estimated amount). That formula would ensure that any server subjected to the tip credit would be earning at least 3 time over the minimum wage, the amount taken by the employer in the credit. Then I could do the right thing (increase kitchen dept wages) even more.

      I hope that you will consider the possibility that I and my fellow restaurateurs want to pay our back of the house employees more. We just feel that the amount of tips some employees earn should be counted as their real income when calculating their wages. And we should get some recognition for creating the environment in which they can earn great tips. We have to buy/lease a space, furnish it, train the staff, buy food and supplies, advertise and market the business and pay for utilities, property taxes, employee benefits, computers, software and more.

      At the end of the day, most restaurant owners earn less on their investment than does the average mutual fund trader. It's a wonder that any of us are willing to take that kind of risk providing meals and jobs, given restaurants' survival rate.

      Thomas Jones

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