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Last week, a hot news attracted the attention of netizens from all over the world. The reason for the controversy was that some North American restaurants added a fee called “Kitchen Appreciation Fee” (KAF) to the bill, which accounted for about 2% of the total consumption. Many customers were surprised when they received the bill, and when they tried to clarify, they did not get a clear answer from the staff.
The incident took place at a restaurant in Maryland, USA. The customer ordered two breakfasts, two orange juices and a cocktail for a total of $56. But when he received the bill, he realized he also had to pay the KAF fee.
According to reports circulating online, KAF is not new to the United States. Some restaurants had already included it before the pandemic. The amount of this additional fee can vary between 2% and 10% of the bill amount, mainly targeting kitchen staff who are underpaid and under great financial pressure.
Meanwhile, online news also mentioned the “tipping” culture, which is similar to KAF but has a long history. KAF is given to kitchen staff, while “tipping” is given to waiters who serve at the table. “Tip” is an extra payment made by customers to service staff. The usual amount varies between 10% and 25% of the consumption, representing recognition of the work of the staff at the table. This tradition originated in London in the 18th century. There was a glass on the hotel table with a label “Ensure Immediate Service”. Customers only needed to put a few coins in the glass, and the service was fast and attentive.
As times change, these cups have been replaced by cash registers, but the culture of “tipping” remains. When customers check out, predefined tip options appear on the cash register screen, with percentages of 15%, 20%, and 25%. In order to avoid embarrassment, many customers will tip a lot even if they don’t want to. Some studies have also proven that tips below 20% are considered “insignificant.”
People have different opinions on the tipping system. According to data from a financial services company, 66% of respondents have a negative view of the “tip” system, and 41% said that employers should give employees better wages instead of relying on tips to make up for low wages. In addition, more than 30% are absolutely against pre-defined tip percentages and say that the system is out of control.
Unexpectedly, in the United States, this issue has even become a political issue. Donald Trump, one of the US presidential candidates, proposed removing tips from employees’ profit and loss statements to reduce their tax burden. Although this proposal has caused controversy, it also reflects the huge impact of the consumption system on North American society.
Back to KAF and tips themselves, these two expenses are additional sources of income for restaurant staff. Although they relieve your financial burden to a certain extent, they also raise some questions worth reflecting on.
First, the uncertainty of the amount they receive through KAF and “tips” creates instability for employees who are already struggling financially. The ideal approach, of course, is to increase your wages so that your income is stable. But wages are part of the operating expenses of a restaurant. If they are increased, costs will also increase, so owners must carefully consider this possibility.
Secondly, kitchen staff and waiters are paid for their work. KAF and “tips” are secondary income from your service. Therefore, if the restaurant owner does not agree, the employees will no longer be able to receive KAF and “tips” because they cannot enjoy two incomes from one job.
Third, if workers work harder to provide better service to customers after collecting KAF and “tips”, the situation will be worse. From the management point of view, employees must provide the same service to all customers, so whoever is rewarded better should not receive better service. Imagine if customers put “tips” in the cup in order to get better service, then the “equality” of serving customers is broken. In order to avoid unnecessary problems, some large companies have banned “tipping”.
Fourth, for the kitchen and waiters, KAF and “tips” represent part of their income and are therefore subject to tax. The boss is also responsible for communicating the amount in KAF and the “tips” received by the employees to Finance, otherwise he will be suspected of underreporting taxes. But in fact, if the customer directly rewards the employees, the boss has no way of knowing the amount they received and cannot notify the Finance Department. If this is the case, the government will collect less tax.
The amount of KAF and “tips” is not high, but it raises many questions. Is this practice worth maintaining? How should the interests of shareholders be protected? How can it be improved? It is worth thinking about.
Legal Advisor of Macau Jazz Promotion Association
Associate Professor, Faculty of Management Science, Macau Polytechnic University
Blog: http://blog.xuite.net/legalpublications/hkblog
Email: legalpublicationsreaders@yahoo.com.hk
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