What is an automatic gratuity?

This article is for educational purposes and does not constitute financial, legal, or tax advice. For specific advice applicable to your business, please contact a professional.

Most restaurants add an auto gratuity, or automatic gratuity, to the bill for parties of six or more. The auto gratuity is usually a set percentage of the pre-tax total, and it goes directly to the servers and other staff who provided service during the meal. Many diners don’t realize that this charge is not a tip, but rather a service fee that businesses are legally allowed to assess.

What are the benefits of automatic gratuity?

There are a few key benefits of auto gratuities for both restaurant owners and employees. First, auto gratuities help ensure that servers receive compensation for their work, even if diners choose not to leave a tip. Second, auto gratuities can help reduce arguments over the amount of the tip, which can be especially helpful during busy times. Finally, auto gratuities provide a reliable source of income for servers, which can help them budget their finances and plan for their future.

Are automatic gratuities considered tip wages?

While some diners may balk at the idea of paying an auto gratuity, it’s important to remember that this charge is not a tip. Tips are voluntary, and diners are free to leave any amount they feel is appropriate. The auto gratuity is a service fee that businesses are legally allowed to assess, and it goes directly to the servers and other staff who provided service during the meal. In most cases, the auto gratuity is a set percentage of the pre-tax total, which helps ensure that servers receive compensation for their work.

How does Square for Restaurants help with auto-grautity?

Within Square’s restaurant POS, you are able to select if you want it to be applied to all checks, on a per-bill basis, or based on party size.

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