Bill gives power to cap tipped wages

The truth is, tipped workers make a lot more than minimum wage. And they should -- it's hard work, and when they provide excellent service, they earn more.

So how much more?

Alaska CHARR members around the state tell me their employees make $20, $30 or $40 per hour in tips, and some quite a bit more. Many in our industry wonder why the Alaska Legislature and the unions think it is important to give a 50-cent-an-hour raise to tipped employees who are making over $50,000 per year. Recognizing this, Alaska CHARR is proposing a new wage structure for tipped employees via House Bill 240, which we spent nearly a year crafting with the help of legislators and our members.

Here's what we're proposing: Tipped employees will earn a paid wage of at least $7.75 per hour, which is the current minimum wage. If an employee also makes at least $7.25 per hour in tips, an employer would be able to freeze the paid wage at $7.75 when the minimum wage goes up in the future. An employee will be guaranteed at least $15.00 per hour before their employer can opt out of future minimum wage increases. That's equivalent to $31,200 per year on a full-time, annual basis.

Minimum wage was established in 1938 to address the abuses proliferating in the sweatshops of the time and, in the process, lift those at the very bottom of the economic ladder. But many of today's tipped employees aren't at the bottom. Many earn $40,000 to $60,000 or more per year, so when employers have to raise their wages, it puts a significant pinch on their finances. We are not suggesting that employers take money away from the lowest-paid workers; in fact the bill guarantees $15 an hour before there is any adjustment allowed.

This system will help businesses like restaurants keep prices reasonable for their customers while they continue to operate on razor-thin margins that average 3 percent to 5 percent. According to the Small Business Administration, restaurants are the most likely of all business types to close, due in large part to these very tight margins.

Keeping track is easy -- 85 percent to 90 percent of tips are left on credit card receipts. These receipts are audited for the purpose of the federal payroll taxes that employers are required to pay on employees' tipped income. The calculation is very simple and won't require any fancy accounting software or other burdensome costs for employers. This existing paper trail would make it easy to clear up any disputes if an employee felt their wage had been inappropriately calculated. Employees would continue to have the right to appeal any pay issues to the Department of Labor's Wage and Hour Division.

There are a lot of good reasons for this legislation that are pro-business and pro-employee. In giving raises to people already making well over minimum wage, employers are less able to give merit-based raises to employees who don't earn tips, such as dishwashers or line cooks. It also acknowledges what the Internal Revenue Service, the state of Alaska and lenders already know: Tips are income. Employees and employers pay taxes on them, and bankers take them into account when considering loan applications and credit worthiness. This is why we believe that tipped income should be considered part of the minimum wage calculation.

House Bill 240 will be working its way through committee during this legislative session, and we hope legislators will give it fair and even consideration. Alaska CHARR believes it will benefit thousands of Alaska businesses and their employees and help keep our private sector healthy.

Dale Fox is president and CEO of Alaska CHARR, a trade association that represents restaurants, bars, package stores and hotels.