Beverage Package Gratuities Update: 15% to 18%

[harz99]

Tipping/Gratuities/Service Charge/ All Inclusive, where's the difference?

 

Could it be that the company would liable for more taxes or employee costs if they charged the passenger more and paid the crew a living wage rather than relying on customers topping up staff pay?

 

Answers on a postcard please!

[GUT2407]

Tipping/Gratuities/Service Charge/ All Inclusive, where's the difference?

 

Could it be that the company would liable for more taxes or employee costs if they charged the passenger more and paid the crew a living wage rather than relying on customers topping up staff pay?

 

Answers on a postcard please!

 

I doubt it.

 

 

Though I can't talk about all countries so it is possible, but I would say highly unlikely.

 

Degrees in Commerce and Law are the basis for my conclusion.

[villauk]

Two burgers with a pint and a glass of wine cost us close to 50 BPS in Cornwall.

 

 

You were either robbed or you are a very, very good tipper - £50 for a couple of burgers :eek:!

[cle-guy]

News Flash: you pay others' wages every time you make a purchase.

Your statement makes about as much sense as saying The doctor should pay his receptionist's wages, not you.

 

When I eat in a European restaurant, chances are, I'm paying a non-negotiable service charge. In Rome, I might pay twice as much for an espresso if I choose to drink it sitting at a table. Two burgers with a pint and a glass of wine cost us close to 50 BPS in Cornwall.

 

No matter which way you crunch the numbers, you are paying the wages.

 

Good point, even in London, I've noticed restaurants sometimes have 2 prices on menus "takeaway" and "eat in" prices. same item, just costs a lot more when you have someone deliver it to you at a table.

[villauk]

Good point, even in London, I've noticed restaurants sometimes have 2 prices on menus "takeaway" and "eat in" prices. same item, just costs a lot more when you have someone deliver it to you at a table.

 

Doesn't cost extra just because someone has delivered it to your table, once you start offering cafe/restaurant facilities, much more legislation comes into play. Certain facilities have to be provided etc., thus resulting in extra costs to the customer ;). It's not just the cost of the extra staff, however that obviously would have to be taken into consideration.

[Adidas4fun]

 

Though I'm not sure perhaps there is a cruise line or several who don't have a policy of adding a percentage to onboard purchases or allowing guests to tip staff, or don't place tip envelopes out during the cruise, I'd be interested in knowing if there is any line out there who does not tack on an automatic amount daily, or to F&B or to spa services, but rather just has a single all-incusive price with no surcharges added.

 

As has been stated before there are a number of cruise lines where there are no daily grats, no service charges etc; the price is the price. And passengers are clearly told no tips are required. And contrary to what one american poster claimed these lines are not going broke.

 

The Paul Gaugin in Tahiti is American owned and has mainly american passengers and strangely they seem to cope with this model.

 

I know its hard for an american to believe the advertised price really is the price you will pay but this works fine for most of the rest of the world.

[The_Big_M]

Again you are fully entitled to your opinion but you are not entitled to superimpose this rationalization on someone else's custom.

 

Could you tell me where exactly I have tried to "superimpose this rationalization on someone else's custom?"

 

The fact that some Americans tip in Australia is only proof that those folks were not informed, and failed to adapt their personal behaviors appropriately to your local customs. And this is regrettable and unfortunate. So you are correct that they should not have tipped. I hope however you are not using an example of a lack of knowledge and insensitivity to justify your not tipping in a country or place where tipping is customary and expected. That's all I'm saying. When in Rome...

 

I'm not sure if you're getting posters confused, but again I don't believe I have made any statement reflecting a situation like the above...

Edited February 8, 2015 by The_Big_M

[blindrid]

In the grand scheme, no big deal here. Classic worked well for us. Wine was acceptable, drinks plentiful, beer cold.

 

Let the whiners complain.whats another $3 a day. And the employees I've talked to make good money so the argument of "living wages" hold no water.

Edited February 8, 2015 by blindrid

[The_Big_M]

Good point, even in London, I've noticed restaurants sometimes have 2 prices on menus "takeaway" and "eat in" prices. same item, just costs a lot more when you have someone deliver it to you at a table.

 

The item might cost as much, but there is an issue of space availability or "real estate". It's similar in Italy.

 

They only have so many spaces so if you want to take up a space you pay more. If you take it with you, you're not taking up space of another potential customer, so there's no extra cost.

[Ayton lady]

There is no VAT(value added tax) on food in a supermarket ie: takeaway but there is VAT on food eaten in a restaurant hence the 2 prices you see in the UK. As an English passenger on a cruise ship we just take the gratuity to be a service charge not a gratuity and we only tip if we get exceptional service. We do often see on English menus ' service charge included' and we would do the same here. The difference is we don't see that on hotel bills. They don't include service charge on those here,so we are more likely to tip porters chambermaids etc knowing they are not getting any service charge already.

[harz99]

I doubt it.

 

 

Though I can't talk about all countries so it is possible, but I would say highly unlikely.

 

Degrees in Commerce and Law are the basis for my conclusion.

 

Thank you. You say you doubt it, does that mean your degrees etc. are not from the US, as with such qualifications I would have expected a definitive answer?

 

Strange how our other prolific US posters have not commented on my earlier post? Is there a degree of truth in what I said?

[GUT2407]

Thank you. You say you doubt it, does that mean your degrees etc. are not from the US, as with such qualifications I would have expected a definitive answer?

 

Strange how our other prolific US posters have not commented on my earlier post? Is there a degree of truth in what I said?

 

 

Yep the lack of definite NO is because I am an Aussie, but even if US qualified not sure I could be more certain because of the ships are not US flagged, in Australia the major lines include grats on ships that are based here year round or in some cases even based here for a season and they are owned by the same US parents and flagged in the same range of foreign ports so I really find it hard to see how there could be tax implications that prevent it.

 

The usual reason that I see given is that it effects the commission paid to agents that engage staff, and that this commission is based on the base wage and not grats, I really do find it hard to accept that these companies are not aware of grats and factor that in one way or the other, I have also been told that the agents actually get paid on a per staff member basis not a % but I don't know which version s true.

[k9x8]

You were either robbed or you are a very, very good tipper - £50 for a couple of burgers :eek:!

 

I would go with being robbed, except they were the best burgers we've ever wrapped our mouths around.

 

Nope, no tip for that meal.

[cle-guy]

I know its hard for an american to believe the advertised price really is the price you will pay but this works fine for most of the rest of the world.

 

And X's advertised price is Fixed$$ plus %% = Advertised Price. We are adults and can do the math. It's not too complicated.

 

This works fine in the USA, and many other places in the world too.

[cle-guy]

Tipping/Gratuities/Service Charge/ All Inclusive, where's the difference?

 

Could it be that the company would liable for more taxes or employee costs if they charged the passenger more and paid the crew a living wage rather than relying on customers topping up staff pay?

 

Answers on a postcard please!

 

Thank you. You say you doubt it, does that mean your degrees etc. are not from the US, as with such qualifications I would have expected a definitive answer?

 

Strange how our other prolific US posters have not commented on my earlier post? Is there a degree of truth in what I said?

 

There is no degree of truth in your statement.

 

In the USA, taxes are paid on gratuities paid to employees. It's part of the IRS code, and is known as TEFRA Reporting- from the Tax Equity and Financial Responsibility Act of 1982.

 

Service staff are automatically assumed to make a certain percentage of their wages in tips, and they are taxed as if that happens. SO when they get a paycheck it is calculated as:

 

• FIxed wage + Assumed wages earned in tips = total earnings
  
• Less taxes on the above amounts
  
• = net pay due
  
• Less Assumed Wages earned by tips already pocketed
  
• = Net balance paycheck written
  

 

An employee can get away from being taxed on an assumed amount if they record on a daily basis to their employer actual tips earned. With today's world of many transactions happening cashless, it's pretty easy to interpret what tips really are or should be, which is why the tips are taxed using this method.

 

Let's look at a martini bar bartender for example, on flair night......They pour 24 martinis at once. Martinis are $13 each.

 

$13 x 24 = $312 x 18% Gratuity = $56.16 in tips, for 10 minutes work. I guarantee you if an employer were to raise the wages of staff and stop allowing for tips, they would not even think of paying a bartender $20 an hour, much less $56.16 x 6 rounds per hour = $336.96 an hour.

 

To make $20 an hour, they need only pour 10 drinks! Although sometimes service does seem slow at martini, they are pouring more than 10 drinks an hour.

 

The service staff far prefers receiving tips than a standard fair wage. Anyone who makes the arguments that stopping tips and going all inclusive would be better for the staff, has no idea what they are talking about.

Edited February 8, 2015 by cle-guy

[harz99]

There is no degree of truth in your statement.

 

In the USA, taxes are paid on gratuities paid to employees. It's part of the IRS code, and is known as TEFRA Reporting- from the Tax Equity and Financial Responsibility Act of 1982.

 

 

All very interesting, but I wasn't asking about tax paid by the employees receiving the gratuities.

 

The post was about potential company liability for extra taxes and additional employee/labour costs if the employee was receiving a higher rate of pay from the company - that would certainly be the case here in the UK.

[Cruise Junky]

All very interesting, but I wasn't asking about tax paid by the employees receiving the gratuities.

 

The post was about potential company liability for extra taxes and additional employee/labour costs if the employee was receiving a higher rate of pay from the company - that would certainly be the case here in the UK.

 

It would be the case in North America too.

[cle-guy]

All very interesting, but I wasn't asking about tax paid by the employees receiving the gratuities.

 

The post was about potential company liability for extra taxes and additional employee/labour costs if the employee was receiving a higher rate of pay from the company - that would certainly be the case here in the UK.

 

It would be the case in North America too.

 

The point is, employees are taxed based on their total rate of pay in the USA, inclusive of starting wage plus the tips earned. Not sure how UK taxes such things. In the US, since tipping is the norm and custom in service businesses, the tax code (as part of the TEFRA regulations) has to account for that tipped portion of earnings, whereas perhaps in the UK, it's not legislated so heavily.

 

That is to say a US based employee's pay as a tipped employee would be taxed as follows(assuming figures as I have no knowledge of actual pay rates and average daily sales by an employee):

• $50 per day = $50 x 30 days in month = $1500 fixed salary
  
• 18% gratuities based on their sales (assume $1000 sales per day = $1000 x 30 x 18% = $5400
  
• Taxes will be levied on $1500 + $5400 = $6900
  

 

What is the tax consequence on paying a "living age" without tips? Let's just assume the "living wage" they pay out equates to the exact same earrings as if being paid a crap wage but also getting tips: $6900 a month.

 

Taxes are levied in both scenarios exactly the same, there is no tax savings. Further more the cots of employer takes on US employees is only

• The Employer Medicare tax (1.45%) and
  
• The Employer FICA tax (6.2%)
  

All other taxes are withdrawn from the emplyee's gross pay (Federal withholding, state withholding, local withholding, Employee paid Mericare (1.45% match) and Employee paid FICA (6.2% match).

 

So paying an employee a crap wage plus tips, the employer is paying

($1500 + $5400) x (1.45% + 6.20%) =

$734

.

 

An employer paying the "living wage" and no tips is paying

$6900 x (1.45% + 6.20%) =

$734

.

 

As you can see, there is zero effect on the employer's costs. Likely should the employer go to a fixed pay rate with no tips, they would then also offer lower rates of pay, and wouldn't actually pay the $6900 monthly wage in this scenario. That the employer allows tipping of the employees, actually lets the employer let the employee make far better wages, as the employer cares less about it, as it's us consumers directly paying that wage, not the emplooyer.

Edited February 8, 2015 by cle-guy

[harz99]

What is the tax consequence on paying a "living age" without tips? Let's just assume the "living wage" they pay out equates to the exact same earrings as if being paid a crap wage but also getting tips: $6900 a month.

 

Taxes are levied in both scenarios exactly the same, there is no tax savings. Further more the cots of employer takes on US employees is only

• The Employer Medicare tax (1.45%) and
  
• The Employer FICA tax (6.2%)
  

All other taxes are withdrawn from the emplyee's gross pay (Federal withholding, state withholding, local withholding, Employee paid Mericare (1.45% match) and Employee paid FICA (6.2% match).

 

So paying an employee a crap wage plus tips, the employer is paying

($1500 + $5400) x (1.45% + 6.20%) =

$734

.

 

An employer paying the "living wage" and no tips is paying

$6900 x (1.45% + 6.20%) =

$734

.

 

As you can see, there is zero effect on the employer's costs. Likely should the employer go to a fixed pay rate with no tips, they would then also offer lower rates of pay, and wouldn't actually pay the $6900 monthly wage in this scenario. That the employer allows tipping of the employees, actually lets the employer let the employee make far better wages, as the employer cares less about it, as it's us consumers directly paying that wage, not the emplooyer.

 

On the contrary; you have illustrated perfectly how the employer costs differ, and why the cruise lines use the model for staff pay that they do.

 

Using your example the living wage would cost the company $6900, the crap wage plus tips would only cost the company $1500, so the company would have increased wage costs of $5400 for that employee alone (6900 - 1500 = 5400).

[cle-guy]

On the contrary; you have illustrated perfectly how the employer costs differ, and why the cruise lines use the model for staff pay that they do.

 

Using your example the living wage would cost the company $6900, the crap wage plus tips would only cost the company $1500, so the company would have increased wage costs of $5400 for that employee alone (6900 - 1500 = 5400).

 

AND the company would have increased the cruise fare commensurately to cover those costs, thus costing YOU and I more money, without regard for if we even use the services of the bartending staff. This would be a net zero effect on the employer, yes wages expense is up $4000, but cabin revenues also went up $4000, so still zero.

 

The company certainly wouldn't ofer an across the board pay raise to staff and not raise their revenue streams accordingly to account for that, or they would be out of business in short order.

 

Increased costs mean cuts someplace else or a need to raise revenues elsewhere, in either method, it's you and I covering the expense, not truly the employer. I failed to include this in my prior analysis, but it should be common sense.

 

Allowing for tips, makes the calculation of such matters immaterial to the employer, where a fixed wage would involve a lot of analytics and issues and variables. It would cause fares to increase if X did this but other competitive lines did not, and X would lose passengers who when doing a search on multiple lines would see "wow, X is so much more expensive" versus the other lines. This would lead to fewer occupied cabins, and a downward spiral.

Edited February 8, 2015 by cle-guy

[blindrid]

I rarely say this but I'm on Cle's side.

 

My son bar tends and prefers the tip method. He believes he earns more than other bartenders as he is better than some of the others. As the majority of his charges are cashless, it's easy to track his (and the company's) with holdings. I typically over tip good staff and under tip marginal ones. If the "marginal" ones got paid the same, he'd probably get out.

[Cruise Junky]

If the company increases the fare to include gratuities a portion would be paid to the TA as commission and the increased fare would be taxed as revenue to the cruise line.

[GUT2407]

If the company increases the fare to include gratuities a portion would be paid to the TA as commission and the increased fare would be taxed as revenue to the cruise line.

 

 

And the increased wages would be a deduction so the nett tax position would be the same.

 

Commission to TA's may be an issue, but do they pay commission of pre-paid Grats now?

[cle-guy]

If the company increases the fare to include gratuities a portion would be paid to the TA as commission and the increased fare would be taxed as revenue to the cruise line.

 

TA's don't get commissions full fare booked, they get it on a portion less than that, as the cruise line does deduct certain pieces of its expenses from that line, it's a murky calculation. It's called the NCF - non commissionable cruise fare, a portion of the fare that doesn't get the commission calculated on. This is not the "taxes and fees" number which also does not get a commission.

 

Commission to TA's may be an issue, but do they pay commission of pre-paid Grats now?

 

Good point, by itemizing out the Gratuities and not including within the fare, cruise lines can shelter that full amount from TA commissions without making part of the "murky" NCF that TA's hate dealing with.

 

Also taxes are levied on PROFITS not REVENUES (except for any sales taxes, which are passed on to us consumers when applicable). So the increased fare would come with increased labor expense, netting to the same bottom line number where the taxes are calculated.

 

As an example:

• Current fare: $2000 where we pay the labor vis gratuities leaves $2000 profit to be taxed.
  
• Fare if all-inclusive: $3000 less $1000 in expense (labor) = $2000 profit to be taxed
  

 

The taxable figure is the same, thus so is the tax expense.

Edited February 8, 2015 by cle-guy

[oneputt18]

Tip, gratuity, service charge or all included, what difference does it make?