Beyond the tip credit: Modernizing business models for equitable wage practices

The political and legal landscape in the United States surrounding the use of tips as wages has long been debated. However, many cities and states are moving toward the abolition of the tip credit, a law that allows restaurants and bars to pay below the federal minimum wage. This study aimed to investigate how restaurants and bars may be sustainable during the transition away from using the tip credit. Interviews and correspondence with 13 restaurant and bar owners and operators were conducted using interpretivist qualitative research informed by community engagement. Analysis revealed contingency theory as a useful interpretive framework. Results indicated six business models as alternatives to the tip credit: (1) inclusive tip pooling, (2) service charges, (3) revenue sharing, (4) transparent hourly wages, (5) hourly leadership, and (6) increased base rates. Some organizations used one model as the sole business model, while other organizations implemented multiple models.