In Israel, It's Often the Waiters Who Foot the Bill

The tip you leave on a restaurant table probably won't make its way straight into your waiter's pocket.

The waiter serving your Caesar salad may be getting a pay slip, but he is still financially dependent on the kindness of tipping customers and the whims of his employer; on legal precedents and proposed legislation.

Following court rulings over the past decade in waiters' suits against former employers, a new method of payment emerged. In the past many restaurants did not pay their waiters any salary and they had to make do with the money earned from tips. The court rulings made it a requirement to pay waiters a salary and to provide them with formal, clear pay slips (Amendment 24 to the Wage Protection Law ). As a result, today many waiters do receive a pay slip once a month, with all the taxes and financial terms of their employment listed - but it is covered by the tips they collected. In order to meet the requirements of the legal minimum wage, restaurants often add money out of their own pocket if the tips do not amount to a sum agreed in advance. If the tips waiters collected exceed the agreed sum, many restaurant owners deduct between 10 and 30 percent of the tips accumulated. They use this money to pay the waiters' social benefits - pension, National Insurance Institute payments and health insurance.

For restaurant owners this nonbinding situation is very convenient. The shekels patrons leave on the table are collected, recorded, divided among the workers and formalized in a pay slip - a system that rarely requires the owners to dip into their own pocket.

But it seems that many waiters, feeling exploited by employers who take charge of their tips, are unhappy with the status quo.

Dependence on 'masters'

Israeli diners have been tipping waiters since the 1960s. This culture arrived here along with the emergence of the first gourmet restaurants, pioneering food critics and new ingredients. Columnist Yehuda Guthelf expressed his surprise in Davar newspaper's August 1962 opinion piece: "For years we took pride in the moral standing of work, the stature of the Hebrew laborer, and the social awareness and sense of freedom and equality pulsing inside him. And now they are defiling his dignity by reducing him to the level of a beggar, by emphasizing his dependence on 'masters.' Not only does he serve them, but he must also hover around them in order to receive an additional bit of charity on top of the wage he is entitled to."

Fifty years later the necessity of leaving a tip has become entrenched and many workers live off this tip, which has moved beyond fancy restaurants to a large swath of service providers.

The restaurant owners association, which unites several of Israel's leading restaurants, is leading a campaign against bills proposed by various Knesset members, including Shelly Yacimovich, Amir Peretz, Eli Yishai, Ehud Olmert and Meir Sheetrit. These proposals, generally referred to as "tip bills," seek to formalize waiters' salaries with a pay slip separate from the tips they receive. Finance Minister Yuval Steinitz sees this issue as part of his declared fight against tax evasion.

In order to maintain the status quo, the restaurant owners association retained lawyers, lobbyists and accountants. "Every few years some Knesset member looking to get into the headlines surfaces and tries to enact legislation, and thinks he can resolve the problem, but there are things that in my humble opinion cannot be resolved with legislation," says Shai Berman, director of the Union of Restaurants, Cafes and Bars and a former restaurant owner. "Tips are a cultural thing. Beyond that, even though it is a grayish and vague area, there is a way of handling this matter. Anyone working as a waiter today receives a pay slip, and his employer pays taxes and National Insurance Institute payments for him and whatever is needed. It's not right to say it's undeclared money [for tax purposes]. Steinitz and [Prime Minister Benjamin] Netanyahu would be wise to wage their battles on the backs of others and not on the backs of the waiters, demobilized soldiers and students who want to earn money so they can pay for their studies and their rent."

But so long as there is no uniform and binding standard, every restaurant owner may decide to pay, or not to pay, as much as he wants to his waiters. Berman: "There are always restaurants that don't follow the law, people who operate in a disorderly manner, but most people in the industry realize you can't pull a fast one because of the awareness of the Tax Authority and the waiters themselves about employment law. Basically, the restaurant owner wants the waiter to earn as much as possible, because his profit derives from the waiter's sales. The better the service he provides and the more he is able to sell a beer and more first courses and then also desserts and coffee, the bigger the tip he gets and everyone benefits from this."

A fictitious pay slip

A waitress at one successful Tel Aviv restaurant is against the way waiters are generally paid today. She shows her pay slip, which totals NIS 1,300 shekels, at a rate of NIS 22 per hour, less travel expenses and insurance fees. "That's what appears on the pay slip, of course - completely unconnected to what I really earned. But it doesn't matter," she says, "because the pay slip doesn't come with a check. It's a totally fictitious pay slip; we received all the money in cash during the course of the month.

"Not only does the restaurant take the waiters' tips, it also randomly takes other sums from us," she adds. "My restaurant takes NIS 6 per hour during the daytime and NIS 9 on weekends from me. In other restaurants they take a percentage and waiters may pay as much as NIS 1,000 a month to the restaurant from the tips he receives."

"They say the money they take from me is to cover social benefits, but I don't have a clue where the money goes," says another waitress, who is in her training period at a Tel Aviv restaurant and has five years of experience working in cafes and bars. "When the restaurant realizes that every waiter it hires for a shift actually pays it, it calls in more and more waiters. Our tips add up; the more the system becomes entrenched, the more they treat our tips as another income. If you take away tips from waiters, you are essentially saying you have workers whom you not only don't pay, but you're also physically stealing from them, and trying to earn something off them from all sides. And everyone does this."

Katrina, a former waitress at a Haifa meat restaurant, says this system made her quit her job. "The norm is that a restaurant owner pays waiters a salary, and the tips customers choose to leave go directly to the waiter," she says, but adds: "In the restaurant where I worked, the owner would decide on his own how much money to give us from the tips collected. He knew that the average is NIS 33 an hour. If in a really good shift the amount exceeded the average, we would still get NIS 33 an hour and didn't benefit from the extra amount. At the end of the month, if the total ... didn't reach the minimum, the owner would agree to make up the difference so that our salary would reach the minimum wage. But this never happened. We received a salary from the tips every day and at the end of the month they issued some sort of made-up pay slip if we asked for one. In other words, the restaurant stole money from the waiters and the customers."

Katrina adds: "A few times we organized, sat down and talked with him about it, and he said that whoever didn't like it could leave."

The salary is the salary

Leading restaurant owners often avoid answering how they pay waiters, or what they do with the money from tips. Every restaurant, it seems, has its own way of paying, or not paying, its waiters.

In fairer and more generous places, waiters stay on for many years. Chef Guy Peretz (Confi in Haifa, Gazpacho in Ashkelon ) is proud that he pays all his employees a formal wage, including the required social benefits, and in addition they keep all their tips as a bonus. "My waiters are on the level of restaurant managers, both in terms of intelligence and service ethic; the most senior waiter has already been working here for seven years," says Peretz. "A waitress at Gazpacho earns around NIS 500 per shift.

"I believe that to employ a good waiter you have to pay the waiter and not rely on the guest," he adds. "I've been in restaurant situations where the waiter tells the customer that he didn't leave a big enough tip. I don't get angry at a waiter who does this, because it's his salary. At our restaurant, even if a guest goes without leaving even a shekel, the salary is the salary. The tip is something extra; it's not a requirement. It's the standard practice, but no one is obligated to tip. A person who goes to a restaurant is required only to pay the bill based on the prices listed in the menu."

Oren Levy, the owner of Piano Piano in Kfar Sava and Yokne'am, supplements waiters' salaries so it amounts to NIS 27 an hour if the tips alone did not reach that amount. "If the waiters exceed that amount, their pay slip still states NIS 27 per hour, and the rest of the tips they receive in cash," he says. "The waiters love that, because they receive tips every day and on top of that they get a pay slip, social benefits, vacation days and sick days. We have veteran waiters who are treated warmly and like family ... [and we hold] fun days and parties. We do everything to hold onto a strong and veteran staff that loves the place."

Many restaurants follow the model created by accountant Avraham (Tico) Franco, of the Franco Nahmias & Co., which specializes in the restaurant business. "The Tico," as it is called, was created to protect restaurants against suits filed by waiters. It enables restaurant owners to use cash tips for a waiter's salary. According to Franco, this makes it possible "to provide adequate compensation for his work, as well other benefits, such as travel allowances, overtime and others, while still not counting cash tips as part of the business's income. Groups of waiters who at one time appeared in the courts are no longer around. The waiters are satisfied with the existing situation and are freeing themselves of the bear hug of all sorts of hangers-on."

A spokeswoman for Kav La'Oved - Workers Hotline for the Protection of Workers' Rights says that, based on complaints from waiters who consult the organization, "many do not receive any salary other than the tips collected, and in the overwhelming majority of cases those making enquiries receive a made-up pay slip listing a sum lower than what they actually earned. This affects the worker's social benefits and, primarily, the payments toward his pension. Based on complaints received, many employers also refuse to pay compensation to waiters who were dismissed, and refuse to recognize them as employees."

Attorney Arik Shalev, who works in labor law, represented quite a few waiters who fought their employers. "There can't be such a thing as someone paying a salary from money he himself did not earn," he says. "This phenomenon of restaurants taking tips and using that money to pay workers' salaries is a new one. Restaurants were asked to issue formal pay slips. In order to avoid having to pay waiters, they decided to take the tips and pretend to give their waiter a made-up pay slip, and a record in some registry. This is nonsense; it doesn't meet the legal requirements.

"If there is income, the restaurant must record it and issue a regular pay slip just like any other business," Shalev adds. "If the tip is a gift to the waiter, then it belongs to him in full. The matter has been formalized and there are laws, which are interpreted loosely by all kinds of agents working on behalf of restaurants in order to maintain the old situation, while finding out about the new laws. This creates an intermediate situation that basically still enables restaurants not to pay tax on the amount they are required to."