Do you want to reduce your payroll and add to the bottom line?

(Note to readers: Today we have the first guest post (of hopefully many more) from Ody Milton, who is a Hospitality Consultant and Culinary Management Instructor.  We thought that many of our readers would be interested in Ody's real world experience in managing restaurants.)

Guest Post by Ody Milton

Banquet and catered events offer this opportunity. When special group events are booked or sold most catering sales operations require that a “Service Charge” be paid for the event. Often these service charges range from 17% - 22% of all food beverage and other charges to the guest. These service charges are classified and handled differently than gratuities or tips. Gratuities and tips are required to be distributed to employees while “Service Charges” distribution can be done fairly according to management policy. For example many hotels retain the entire service charge and pay set –up and servers for these banquet/events an hourly “Flat Rate”. This flat rate hourly payment includes at least a minimum wage plus some flat distribution of Service Charges.

The job classification of banquet server may offer a $17.50 dollar per hour rate of pay. In essence this flat rate of $17.50 per hour is comprised of a base pay such as minimum wage at $7.50 per hour and a service charge distribution of $10.00. If the hotel collects greater than a $10.00 share per hour in Service Charges, then it can retain the difference as a credit to payroll on the P & L. This retention can be considerable! In some cases profitably for catered events has more than doubled by adopting this flat rate distribution method.  Don’t forget to check with your favorite employment attorney, laws in some states may vary.


We would like to thank Ody for this first guest post.  He is correct in noting that under California law, mandatory service charges do not have to be paid to employees.  Alternatively, tips left by patrons for the employee are the employee's property and cannot be collected from the employee unless the employer has implemented a valid tip pooling arrangement.   For more information about Ody's post, he can be reached via email or at 818-292-2506.
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