Recently, more Korean restaurants in Koreatown are trying out no-tip experiments.

While still a minority, there seems to be a growing interest among restaurant owners as word spreads.

A Korean restaurant that opened in LA has declared that it will not accept tips.

Instead, they changed their operation to a system where customers go to the counter to place their orders and pick up their food.

Surprisingly, the response has been quite positive. With clear pricing and no need to feel awkward when paying, customers actually feel more comfortable.

In fact, American consumers are already quite fatigued with the tipping culture.

A survey released in May of this year found that 81 percent of Americans believe the current tipping culture has become unmanageable.

55 percent of respondents said they leave tips not out of joy, but due to social pressure and guilt.

However, this issue is not just from the customers' perspective. Eliminating tips ultimately means changing the entire pay structure for restaurant workers.

According to federal labor law, the minimum wage for tipped employees is $2.13 per hour.

This structure assumes that tips will make up the difference, recognizing a tip credit of $5.12, which is the difference between the federal minimum wage of $7.25 and the tipped minimum wage.

Maryland has a higher standard, requiring that tipped employees receive at least $3.63 in cash as their minimum wage.

If the total, including tips, does not meet the state minimum wage of $15, the employer must make up the difference.

In contrast, California does not recognize tip credits at all.

Regardless of how much in tips they receive, they must pay a full $16.90 per hour in cash.

Additionally, there have been recent tax benefits related to tips. Starting in 2025, a new law will allow for federal income tax deductions on tip income up to $25,000 per year.

However, this benefit only applies to voluntary tips given by customers, not to service charges or automatic gratuities imposed by restaurants.

So, from the employees' perspective, if tips are eliminated and replaced with service charges, this tax benefit disappears as well.

Thus, even for the same no-tip experiment, the responsibilities of employers and employees can vary significantly depending on the state and whether it's tips or service charges.

If a place like Maryland, which relies on tip credits, eliminates tips, they will need to fill that gap in labor costs.

Typically, they will raise menu prices by about 10 to 20 percent or adjust the hourly wage.

For reference, it is possible to keep tips without eliminating them entirely; if an employer wants to share tips with kitchen staff, they must forgo the tip credit and pay all employees the full minimum wage.

The problem is that there have been several past experiments, and the results were not very favorable.

In 2015, a large seafood chain tested a no-tip policy in 18 locations.

In 14 of those locations, customer traffic dropped by 8 to 10 percent, and ultimately, the chain reverted back to a tipping system.

A well-known restaurant group in New York also eliminated tips in 2015, incorporating service charges into prices.

They raised hourly wages and provided benefits like paid time off, but prices increased by about 15 to 20 percent.

Ultimately, if you want to eliminate tips, it seems you need to change not just the price tags but also the way the restaurant operates.

If you plan to work in a Korean restaurant, be sure to check whether the hourly wage includes tips or not.