On Pay Equity
All orders are subject to a Fair Wage Surcharge which addresses pay inequity and helps provide higher wages for all of our employees.
We have been working for years to improve our pay structure with a close focus on equity. Pre-pandemic, we had a Revenue Share program (c. 2015) in place which was designed to help address the wage gap between tipped front of house workers and untipped back of house workers. The company distributed 3.5% of food sales each pay period to non-tipped workers based upon hours worked. When we reopened post-pandemic, this model no longer worked: just a small number of employees were working in the Front of House Attendant role and were sharing a large amount of tips while the rest of the staff were missing out. Legally, this was inevitable.
As a result of the inequity, we put into place a Fair Wage Surcharge in March 2021 (then called Administrative Fee or “Admin Fee’ for short). It was largely an experiment, understanding that something had to be done. As we had more data, we could then make adjustments and updates to it. The goal of the 2021 Fair Wage Surcharge was to improve pay equity across positions and to also increase take home pay for our employees. In many ways, we have made forward progress, but it has been a challenging process both in accounting and in determining if this is the best way to approach the issue. Our latest approach (rolled out in 2023 at counter service concept, Mamaleh’s Delicatessen) will help to better achieve these goals; it will offer clear and reliable wages for employees, and a transparent path for growth.
Our original intent was to fully remove the ability for guests to tip. At this time, we aren’t able to do this because of limitations in our point-of-sale system, called Toast. Since we offer delivery through our ordering sites that is serviced by a third party delivery partner, we need to allow tips for drivers who are not our employees. We can’t remove the option to tip our staff and keep on the option to tip the delivery driver – it’s all or nothing. We have also received feedback from some guests who would like the option to leave a tip even with the Fair Wage Surcharge on their check. Due to these reasons, we’ve decided to leave the tip line on all checks, (online and paper). Tipping our staff is no longer necessary, but always appreciated if a guest cares to.
Beyond pay equity, we also feel moved to make these changes to provide stability and dependable wages to our tipped employees. These front of house positions have historically been shorter shifts during the busiest times, with hours being cut when business is slow. We have decided to forgo the sub-minimum wage and start all employees at a minimum of $15.00 per hour. This is a noticeable expense to the business — the sub-minimum wage has allowed restaurants ‘cheap’ labor, and while the system works for a business’ bottom line, we feel it is time to move beyond that crutch. In our model, front of house workers can know that their time and efforts are valued, and can rely on steady wages that are not subject to weather or the level of business on a given day.
At our counter service concept, Mamaleh’s Deli, the pay structure is further based on job positions using well defined descriptions of the roles. The rates will be set with skill, experience and responsibility required taken into consideration. This framework will have two effects. The first is that it will outline a path for growth for each role. For example, employees can focus attention on achieving higher skill levels within job positions. The second effect is that our pay structure will standardize the measures of compensation such as job performance and time with the company.
WE ARE LOOKING FORWARD TO CLOSING THE WAGE GAP BETWEEN THE FRONT AND BACK OF THE HOUSE, AND DOING OUR PART TO GET OUR EMPLOYEES WORKING FOR A LIVING WAGE.
The purpose is to make pay equitable between FOH and BOH and make a living wage for all.
Why are you doing this?
We think that it is important to work towards pay equity and providing a living wage to all employees. Of course there are many challenges to running a business – and labor cost is high among them. Still, it is our priority to continue to work on leveling the playing field for wages in our businesses, and pay our employees the most we can while running a healthy business.
We’ve developed a plan to give everyone a dependable wage rate that will not fluctuate with slow or busy times.
Why not just share tips?
Massachusetts is state that does not allow tips to be shared between the Front and Back of the house. We are working with elected officials to make this change in regulation. But, until then, we are forced to work around the issue with this pay structure.
How does the increase in FOH per hour wage affect labor cost?
It raises the labor cost to each business significantly. We have decided though, that working away from the tipped minimum wage is an important step in providing wage stability to all of our staff. We’ve committed to giving this model a real chance – we reevaluate a few times a year, and also accept that it may not be realistic in the longterm. If that is the case, we will reevaluate everything to see how to keep moving forward with equity and living wages as our guide.
Does all of the Fair Wage Surcharge go to staff?
Yes, all of the Fair Wage Surcharge is dispersed and accounted for into non-ownership labor wages and labor expenses each pay period.
Does the payroll expense increase?
Yes, when payroll increases taxes also increase.
Is the loss of tip credit significant?
It does affect the owners and the company investor’s personal taxes. However, taxation is limited as it is a flow through.
What’s the formula for distributing the Fair Wage Surcharge?
With the new pay structure associated with the Fair Wage Surcharge, that money will be used to support straight higher wages. We will determine new wage rates for all of our current employees, taking into account time with the company and past job performance. We will meet with each employee to review their new wage rate and answer any questions.
Our pay structure is based on job positions using well defined descriptions of the roles. The rates are set with skill, experience and responsibility required taken into consideration. This will standardize the measures of compensation such as job performance and time with the company.
By using the Administrative Fee in this new way (titled Fair Wage Surcharge), employees will no longer see it listed separately in their paychecks. This dependable wage rate that will not fluctuate with slow or busy times.
Are we planning a rainy day fund with any of these monies?
No, we think it is better to distribute all of the money each pay period.
WHAT DOES ‘GUARANTEED MINIMUM’ MEAN?
The base wage for any employee in the company starts at $15.00 per hour. Base wages increase depending on years with the company, as well as experience, skill level, and responsibilities of the position. All employees are guaranteed a minimum of $17.00 per hour. This means that if tips and the FWS don’t get an employee to $17.00 per hour, the business makes up the difference to ensure that ‘take-home’ rate.
Do we plan not to take tips when they can be legally shared with the whole staff?
Unfortunately, we don’t have all the answers right now, and it’s hard to know what might be different when/if tip sharing is allowed. If tip sharing were allowed today, we would be allowing them to come in (as we are currently!) and would happily share them equitably with all of our staff.
When are employees eligible?
Newly hired staff are included right away.
On Living Wages
We are committed to providing the best possible work environment and exemplary work practices for our employees.
Daily, we work to nurture an inclusive workplace where all staff feel included, respected, and valued. We employ a leadership team of which more than 50 percent are women and people of color. We offer competitive wages as well as a meaningful benefits package, and over the last decade, we have lead the industry in evolving our business practices to address some of the intrinsic injustices in the tipped model of the hospitality industry. Read on about how living wages and pay equity have helped us push the needle in the right direction.
In an early attempt to tackle pay equity across teams in a restaurant scenario, we developed a “Revenue Share” program in 2016 to improve the pay of our kitchen staff. The title of the program was clear and straightforward, we literally transferred a percentage of sales each pay period to that team (raising their pay by approximately $2 an hour!). This sturdy program would become foundational in our continuing efforts to achieve pay equity, however due to a change in operations over the first year of the Covid-19 pandemic, we saw a need to overhaul the design of our pay policy. We launched early 2021 with the title “Administrative Fee,” an automatic surcharge policy for our guest checks. Funds collected with this fee were piped directly to staff through payroll and it immediately had positive effects on wages.
Looking back, this name has had an unintentional consequence by obscuring the initiative’s purpose. Although legally precise, the basic nature of the title did little beyond helping us distance it from service fees and automatic gratuities. Today we are taking the next step of our journey in wage parity between front and back of house positions, both as an independent operator and as an integral change maker in our industry. We’re renaming the policy for better transparency, the Fair Wage Surcharge (FSW) we feel is just that, an additional charge on the bill to allow us to pursue our longtime effort bringing living wages and pay equity to all.
As a first step in addressing inequities, in 2016, we instituted a Revenue Sharing model across our restaurants, sharing a percentage of food sales with our kitchen staff, raising their pay by approximately $2 an hour.
Then in October 2020, we committed to take a stand with One Fair Wage and the High Road Restaurants organizations. With these commitments we pledged to work towards a legislative package that includes:
- Work towards a $15 minimum wage for all workers
- Fight to do away with the Sub-minimum wage for tipped workers
- Fight for legislation that allows restaurant owners to distribute tips equitably between the Front and Back of the House
Additionally, we subscribe to the stated mission of RAISE: High Road Restaurants, ”[to] advocate for fair wages and increased racial and gender equity through hiring, training, and promotional practices.”
In early 2021 we took the next step; this time targeting pay equity. Enacting an Administrative Fee allowed us to distribute these funds across the restaurant’s employees (excluding ownership), decreasing the wage gap that had been so prevalent between tipped and non-tipped positions.
A year later and armed with data, we’ve redeveloped the plan for our counter-service concepts: to give everyone a dependable wage rate that will not fluctuate with slow or busy times. By using the Administrative Fee in this new way, employees will no longer see it listed separately in their paychecks. The Administrative Fee will now be called ‘Fair Wage Surcharge.’ Our full service restaurant employees still see the FWS broken out in their checks and receive it separately from their base wage.
We have installed these policies amongst our restaurant group, positively impacting the take-home pay, especially for our non-tipped staff. As we expand our model of service, we are continuing to reevaluate the distribution of tips, Fair Wage Surcharge and base wages to hold to our goals of pay equity and living wages. Still, we believe the passage of legislation targeting pay equity and living wages in the hospitality industry will create a level playing field, eliminating the advantage to those who would choose to maintain and leverage low wages to keep menu prices down.