Restaurants Make Workers Pay 2% On Credit Card Tips

MINNEAPOLIS (WCCO) — How would you like it if your employer began taking an extra 2 percent out of your pay?

Parasole, which owns 12 restaurants and bars in the Twin Cities, will now be taking 2 percent of a server’s credit card tips, according to employees.
Some employees said they received the news last week.

“For me, I guess 2 percent is just hard to imagine without having experienced it yet,” said an employee named Eric.

Eric is a server who works for one of Parasole’s Minneapolis restaurants. He is aware that 2 percent of the credit card tips he receives during his Monday night shift will go into the pockets of his employers.

“I could see where that would be problematic. Especially at higher-end restaurants where people pay with credit cards,” Eric said.

Parasole owns Chino Latino, the Uptown Cafeteria, Il Gatto, Burger Jones and other popular Twin Cities restaurants.

The news of the 2 percent plan isn’t going over so well. On Facebook, one person wrote, “If I took 2% of the company’s revenue, they would call it theft.” Another person wrote, “A service worker should not be penalized for the way a customer chooses to pay for their tab.”

Parasole would not comment on this policy or how they pay their employees.

Kip Clayton, Parasole’s vice president of marketing said, “Given the increased usage of credit and debit cards, there is a restaurant industry movement to pass all or a portion of the credit card fees, on tips only, to the tipped employee.”

It’s a philosophy that Eric actually agrees with.

“It’s nice to have a job and to work for a company that takes care of its employees, so if we have to put in a little extra effort…. that’s not a problem for me,” Eric said.

If a customer were to pay a $20 tip on their credit card, he or she would pay 40 cents.

It may not seem like much; but another server we talked with said she is making minimum wage, tips are slow, and this adds up.

Bottom line: If you want your server to get the whole tip, use cash.

Parasole isn’t alone in this. Other Twin Cities restaurant companies are taking the same approach.

More from John Lauritsen
  • tom

    Parasole should be ashamed of this. Paying min wage and then taking 2% from an employee. Its no wonder the economy is going down the tube. All employers should give employees 1.00 for every year as a raise. Problem People are not seeing is the employer that use temp agencies needs to step up the wage. In today’s market temp agencies pay the powest they can , to start 10-12. experienced people get 12-14. In 1985 the same jobs would have been 14-16 and expeienced 16-18. Temp agencies and employers like parasole need to be investigated to get wages back up to where they should be. Also without health ins, vision and dental, an employee making the minimum wage gets sick, they are in deep trouble. COME on OBAMA , Help us in this situation.

    • nkg0515

      You want HELP from Obama???? He is part of the problem! Either boycott the restaurants, or start leaving cash tips, simple as that.

    • Silence

      So does the employee end up paying the restaurants share of the credit card fee as well? Also, The restaurant can write off the cost of the fees. Do they write off the part the employee pays? Will the employee be paying taxes on this even though they may not realize the full 8%? Sounds illegal!

    • Chris

      Being a restaurant manager in the Twin Cities (we do NOT do this), I don’t even understand how this is legal. It is the cost of doing business, much like I can’t charge an employee for breaking things (plates, equipment, etc.) if done in the course of doing business. I suppose since it is only on the tip portion it takes advantage of a loophole… That being said, Tom you wouldn’t like the world that your purposal would create. Since I run the numbers at my restaurant, I know how thin the line is (and it’s thin), and my store is considered successful… I would be in the red in a matter of months paying my staff like that. I have a server who has worked for the company for 25 years, she is slow and not that great at her job. By your standards I would be paying her plumber’s rates and providing healthcare and dental…so what do you think THAT does to the profit margin? What do you think I will have to charge YOU the consumer to compensate for that? That in turn will put me out of business and this lady out of a job. I think the 7.25+tips she earns (which in the rest of the real world it’s 2.38) is more amicable to her than trying to retrain for a new job at her age. I can assure you (as I do the payroll), this woman clears about 38,000 a year (that’s what she “reports”) with nothing more than a high school diploma. So go easy Parasole as they do provide jobs (and are pretty decent to work for from what I hear) as they are doing what they need to do to stay successful in a troubled economy.

  • g-doug

    Will Parasole also be paying the income tax on the employee’s tip wages? You know the IRS ASSUMES wait staff make at least 8% of the bill in tips, whether they do or not, and adjusts taxes accordingly from those receipts, Shame, Parasole. You’re not only ripping off employees, but are now also making sure I NEVER visit one of your restaurants…

    • Great point g-doug

      Makes you wonder if it is even legal?? It is absolutely unethical; and I will be boycotting their chain. Greedy parasites.

      • Frank Chacon

        its legal the software for the credit card terminals allow that. This has been an options for over 10 years that I know of just hardly used. The restaurants reasoning is each transaction the bank charges so they justify taking that to cover fees. Wrong yes it is.

    • Justin

      Okay, So if you look at this story from the Employers Standpoint. If someone comes into my restaurant, eats, and then leaves a $20 tip on top of their food bill, the company was paying the additional credit card fee of $ 0.40. While it does seem wrong to be taking away from the employee because they technically are, they are removing an additional fee that in reality they shouldn’t have to lose. It’s the credit card companies and the fees that we should be mad about. For me, I would rather see the company/ employer do this so that they remove that additional fee so they can keep their doors open to still be able to employ these people.
      But like other people have said- we can eliminate this problem by simply paying our meal/ food/ drink bill with a credit card and leave your tip in cash.

      • Sam

        Then add it to the customer’s check and see how long you keep those customers. The employees are the ones being injured. You are a rip off with NO ETHICS or Morals!

  • Pat

    Unbelievable! If you don’t want to pay for the credit card fees, don’t take credit cards. Why should one of your employees be responsible to cover the cost of the fees when they have no part in the profit of the corporation? Do their management have to cover the costs of the delivery fees from vendors? Do their general managers pay for the lease on their property? If it is such a small cost, why are you pawning it off on minimum wage employees who do not receive paychecks anyway after the taxes on their tips have been taken from their wages(Its true, I have not received a paycheck in 3 years, we are entirely reliant on tips? Love me some Manny’s, but I will not patronize a restaurant with such despicable practices.



    • DIsappointed

      Servers don’t get minimum wage in most States. In NC we only get $2.43 an hour.

    • retphxfire

      First, stop screaming at everyone. Second, servers are exempt from minim wage requirements because tips are considered income, so employers are taking THEIR income. FYI, federal law states that salary, plus estimated tips equals minimum wage of 7.24/hour. That ASSUMES tips will be equal to the minimum, if not, oh well, still be taxed that amount. The employee has to still pay the income tax on that 2%, which may add up enough to really hurt. So unless you want to continue to ‘sound’ like a fool, stop screaming and do some homework, you sound more like a baby with a tantrum.. sheesh

    • Stella

      You really don’t know your business minimum wage is not $8.50. I have been a server for 25 years and have never made 80 bucks an hour I think you might want to go back to dreamland , or quit hanging around the strip clubs. Cry baby servers…have you ever done the job? I am sure you most likely don’t have one. It is just pure GREED! Everyone is desperate so it is just GREED. Obtuse is what I call you.

    • Pat

      First, minimum wage is $7.25. Second, if you want that kind of money, give it a try for yourself. Third, if Parasole is having financial difficulties, maybe they shouldn’t open 3 restaurants within 100 feet of each other.

    • Molly

      Moving forward, I believe it would be fair if you gave up some of your income to cover your company’s operating costs. You seem to be the generous type so let’s start with you. How would that affect you each month? Would you be ok with making (in some cases) $100-$200 a month less? In a year the company will have kept up to $2400 a year per tipped employee to cover THEIR operating costs. I don’t work in the food service industry, but know many that do. Maybe they should move into the corporate office with you so they could continue to enjoy the good life. Ahh, must feel good to be so carefree.

      • Linda

        A server would have to make $5000 a month in credit card tips in order this practive to cost them $100 a month. The server would nit be taxed on the 2%. They would only revice 98 cent for each 1 dollar charged. Reporte dincome would be cash received.

        Why do people believe the emoloyer should pay the fee on a tip the employer gets NO BENEFIT from. This is not a cost of business, its a cost of tip.

        By the way, I am in a tip position for over 30 yrs

      • retphxfire

        Love your response, molly.

    • mrdandbigb

      Actually servers usually only make anywhere from $2.50 to $4.00 an hour. The hourly wage is different because they assume you make enough in tips to bump up the hourly to $7.25. However, the servers still pay taxes on all they make.

    • Drew

      Also, not all SERVERS at restaurants make “minimum wage” either. Minimum was is $7.25, however, servers in my state make $3.63 an hour plus their tips. While a server could make a good hourly rate, it’s not a guaranteed wage. Not to mention, servers generally already “tip share” with bartenders, bussers, etc with a % of their sales. Again, it doesn’t guarantee their service either, but it’s required. the only servers that I have seen “take home a paycheck” are the ones who are generally single moms with several “deductions” on their paycheck. Now, they have made that choice themselves, but it doesn’t make it right for a company to charge the credit card companies fees. I know some businesses don’t accept specific cards because of those fees. Maybe they should only accept “specific” cards???? I agree with the others, you apparently haven’t ever worked in the food industry in your life. It’s a very tough job to be successful at. Not everyone can do it!

      • becca

        We make $2.13/hr…and if I had to pay out 2% on every cc transaction I would tell them to take a hike.

    • Matt

      I just want to say that I understand how people think servers make 60 to 80 dollars an hour. The thing is we might make that for one hour of our shift. then we stand there for 8 more waiting on people who are just having a drink. (which is fine i’m not complaining about that) I just want you to know if that “high end” restaurant where everyones tab is 100 dollars they most likely only have 3 table and they will probably only have 5 tables in their entire shift. So they have 500 dollars in sales. Assuming that every customer they have tips 20 percent they make 100 dollars. Then they give at least 30 of that away to their wait assist, bartender, and food runner. Leaving them with 70 dollars before taxes. Also keep in mind that servers don’t end up working some shifts they scheduled for. If you work somewhere there is a patio. If it rains and your scheduled outside you are now out of a shift and you make nothing that day. A question I would be curious to as parasole is if they pay for walk outs. I have worked for many restaurants and all of them required the server to pay for them. The restaurant is supposed to pay for them legally but if you want your job you hand them the cash and shut up. All I’m trying to say is that there are a lot of behind the scenes things happening in every restaurant that the guests are not aware of. You can’t assume that every server is making that much cash.

  • Jerry

    I won’t be patronizing their establishments, or any other establishment that steal from their employees.

    • RaeRae

      You’re just hurting the employees then. How about you pay the food portion in credit (which they get 2% less of to cover their fee) and tip in cash. “Hurt” the establishment, not the employees,… putting the restaurant out of business just puts the servers (not to mention cooks, hosts and any other employees) out of work.

      • Jerry

        GREAT POINT!

  • Julie

    They should be upping their pay by 2% then.
    They are stealing 2% of their tip, meant as a gift from the served to the server.

    Servers get the lowest hourly rate of pay and believe me, the 2% adds up, more slowly for some than others.

    I definitely will never be going to any of the restaraunts that do this.

  • Joe

    How stupid can you be? Credit card company charges 2% fee to accept credit cards. Restaurant loses this 2% on their meal. Why should the restaurant also pay 2% on the tips? They are only charging the employees the 2% of their tips, which goes straight to the credit card companies.

    Have a problem? Talk to the credit card companies – THEY are the ones taking the 2% from the wait staff. Want to help? Add an extra 2% to your tip then. If you don’t want to do that, you have no right to complain.

    It is NOT the employer “STEALING MONEY”. They are just not giving an extra 2% of their money towards the tip jar.

    • Justin

      Well said Joe. This is all on the credit card companies. The way the story is written- not saying it was bad, but it implies the restaurants are at fault.

      If you look at this story fully, people would see that restaurants are just now deciding that they don’t want to pay a 2% fee on a ‘TIP’ that was never theirs.

      This is just like borrowing a friend $20 and only getting $19.60 in return

      • just saying

        “Borrowing a friend”

        No wonder people think Minnesotans are a$$-backward!

  • Melanie

    When checks were accepted everywhere, there was no fees to the server when the bank charges the business fees to cash the checks. The business will pay the fees for the debit/credit card use to pay the bill with or without server tips added into it. If they want to charge the employees for customers paying for their meals with a card, then they should just instill a cash only policy. Just saying….

  • Jack

    maybe they should have a policy of no tipping. Then there would be no problem.

  • Eric

    TAXI DRIVERS must pay 5% – yes, 5% of ALL CREDIT CARD charges back to the taxi firm. Not just the tip, but the entire charge !!! The taxi firms FORCE YOU TO ACCEPT credit cards and then charges you 5%. On top of that, you pay from $500.00 to $600.00 EVERY SINGLE WEEK to lease the cab and another $400.00, (average), in fuel EVERY WEEK. It costs $1000.00 JUST TO TURN YOUR KEY ON EVERY WEEK. PLEASE pay youor taxi driver in CASH and ask for a recipt.

  • As jack said...

    What wait staff really make. First the gov’t must tax the tip income of the waiter/waitress. How this is done is that the sales of food and beverages made by the wait staff is calculated and deducted from the waiter’s wage paid by the employer. This system was implemented by the Reagan Administration in its first few months in his first term (so much for the myth of Reagan not being a tax increaser). Second some restaurants do not pay their employees a minimum wage. Why? Owners were exempt from the requirement because they said the waiter/waitress compensation is largely based on tips. Whether an employer pays minimum or not is their own prerogative. Third many of the previous two points are based on the assumption that ALL people pay at least a 15% gratuity. Many do not they pay less especially in the current economic climate not to mention that fewer people are eating out. Now the additional cost of the 2% on tips paid by credit card charged against the employee who has no control on the method of payment he or she receives is unfair. The method is control by the owner of the restaurant.

    Now remember the restaurant only accepts this form of payment as a service to the customer and is charged by the financial institution for that service. So it looks like the banks are trying to win again. If the restaurant wants to avoid this fleecing of their employee the should no longer provide the option for the customer to pay by debit/credit card. And some people wonder why others are marching on Wall Street.

    • jacob

      you act as if a waiter/waitress job is a career. If you expect to raise a family, buy a house and retire on a ranch in texas by waiting tables you are nuts. Not all jobs are careers, they are work while your going to school or making extra money not a career. Its a no skill job and I’m sorry for those that think otherwise.

      • mrdandbigb

        It’s a no skill job? Really, have you every really sat down to talk to someone who owns a restaurant or manages a restaurant? Alot of these people have degrees in management and as for those who work there as a chef or bartender you have to be trained. Some of those waiters/ waitresses use that experience as a stepping stone into management or hospitality.

  • Gunny

    I feel for the servers and small businesses who have to pay a % of a sale/tip for a customer who uses a card. The banks SHOULD be asking a flat fee for card usage and not a total percentage for a transaction. Think about it; the bank uses computers to process transactions, millions a day, and a flat fee would more than cover the cost of these systems. Instead they charge a percentage. This is one area where I agree with the “move on wall street” attitude. If a flat fee was used small businesses could more easily cover this cost and servers would not have to take the hit.

  • Citizen

    Easy solution to this. We can boycott the restaurants, or if one must go there, pay in cash only. Problem solved. For years I have not eaten tuna because of the dolphin issue. I minimally shop at WalMart because of the way the company treats its employees. We can all vote with our individual consciences against these types of actions.

  • Parasole Thieves

    Boycotted for life.

  • Otto

    They are just taking 2% of servers tips…easy solution…pay with plastic then tip your server in cash


    Just a thought. …if we all stop eating at these restaurants , and stop shopping at Wal-mart don’t get me wrong, not a big fan) won’t these business go out of business? Then , won’t these employees be out of work? There is a misconception that if you own a business you must ne rich and never work. Got news for you , it is just the oppisite. Until you have run your own business there is not a lot you can say. Business owners do what they need to to make sure the future of their business and there employees stays in tact.
    Another thought…if these restaurants are doing well and they continue to open more restaurants , doesn’t that mean they hire more people to work?

    • Citizen

      @Justathought. Other businesses will arise and take the place of the failed ones. I remember when WalMart was just a Texas company and KMart was ascendant in Minnesota, so was Pamida. So were mom and pop grocery stores. Where are they now? Many driven out of business by WalMart. The retail cycle churns constantly. And remember that Sam Walton’s 6 heirs are at the top of the income list of BILLIONAIRES. There will be competition for Parasole, and its better workers will go someplace else where management is not so predatory. If this restaurant operatoin were “doing well” it would not need to tap its low-paid workers’ tips for income.


        If the retail cycle churns constantly , why do we have so many unemployed poeple right now?
        Yes the Waltons have an overwhelming amount of money , but , they also took an overwhelming amount of risk. Anyone can do that if they want to take the risk. I do agree that there are some business out there that treat there employees unfairly , but it is not just the big ones , those are just the ones you hear about. More people , more complaining. I know an owner of a small diner who thinks he does not have to pay his staff overtime because he is a small business owner. Also , makes his manager come in 1/2 hour early to open but does not let her clock in until they open. Why does she still work there? Because it’s a job. So , it’s not just the big stores that treat their employees poorly , those are just the ones you hear about!
        In defense to the wait staff , I beleive the restaurants should post a sign in regards to the 2% deduction on tips. Then the customers can decide if they want to add another 2% or pay cash.

  • RaeRae

    If the servers don’t like this, they can ask their patrons to tip them in cash. Uncomfortable, yes, but a tip is a gift from the patron for service above and beyond the job. I wish we had the German mindset on this and servers got the same minimum wage as everyone else and tips were $2 no matter what the total bill was, whether there are 2 people or 20.

    In addition, tips are gifts. If someone buys you a Visa giftcard, they pay, let’s say $55 for a $50 giftcard. No one is screaming about this fee. Let’s not think of this as taking money from the waiters, let’s view it as, whatever the patron is leaving behind is partially to cover the 2% transaction fee (like the $5 on the Visa giftcard).

  • Tom

    Shame on Parasole!

  • security0207

    I see some of you people have NO -idea what you’re talking about because in Minnesota minimum wage is 7.25 not 8.50 … what planet are you from ???

  • erin

    I always tip in cash. Don’t take this out on the workers, when numbers go down, hours go down, not upper management salaries.

    • tom

      when numbers go down you don’t need management, they will be gone also

  • Doc

    Just another example of how the Durbin Interchange Ammendment is benefiting the corporations and killing the little guy.

  • T L K

    I have sent this article to everyone I know that lives in the Twin Cities…asked them to pay cash or do what I would do….eat elsewhere.

  • Let the Server Choose

    Perhaps the workers should be allowed the same choice as the business. Identify payment method before seating the customer. If the server feels they make more money by serving only cash paying patrons then they can choose that. If they feel the extra volume of the credit card paying customers is a good choice even with a fee attached to it they can server them as well.

  • mona

    How about charging customers an extra 2% to use their card?

  • Dave

    If the wait staff in a business receive $10,000 in tips in a day all on credit cards, then the business pays an extra $200 in credit card fees for money that they don’t receive.
    Now if that business sold $50,000 worth of product, they already paid $1000 that night in credit card fees. Due to tips they pay another $200. They receive $48,800 for $50,000 worth of product. Now figure in the cost of overhead, the product you are selling, employees and you find a business that could benefit greatly by that extra $200/night. That would be $73,000/year. That could be more businesses opening up, more employees, or heck, maybe just higher wages for staff to begin with. And thats just for 1 business. If a chain has just 50 places of business, that shoots up to over $3.5 million a year. More than likely though, this money is going into some fatcats wallet never to see the light of day again.

    Go one step further though and look at the credit card and the bank that holds the credit cards. They charge you the consumer anwhere between 15 and 35% or more interest on your credit card. Some have annual fees in addition to the interest. Most charge fees if you pull the money out directly to use as cash. And they also get a cut of anything you buy as they charge the retailer 2% or more of every purchase.
    So they loan you money at an outrageous interest rate. Then they charge anyone who accepts your payments with their money.

    So this is the banks and credit cards trying to not only rip you off, but also any business you deal with. Then the business has to come up with a way to offset this extra expense and either charges you more, or in this case, hits up the minimum wage staff to make up the difference.

    Business A preys upon Business B and the public.
    Business B needs to offset losses to Business A by preying upon the public.
    The public just simply loses.

    Trickle down economics folks. It works, just not the way the Republicans explain it.

    These are the big businesses we need to bail out and support with government subsidies so they can continue to bleed us dry.

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