Most restaurant bills are paid with electronic money - credit cards dominate. The restaurant pays a 1 - 4% fee to the bank for the privilege of taking credit card payments and therefore is paying a fee on any tips left on credit card - the primary way most customers pay. Restaurants are stuck paying a transaction fee on money they never receive.
If a customer leaves a server a $100 tip on credit card, it costs the restaurant $2 to process that transaction. It may seem fair that the server only receives the $98 remaining; the server should pay the credit card fee. Fairness, as represented by the law, varies wildly across Canada.
It is legal in Ontario for an employer to recover credit card processing fees from tips prior to distributing them to employees. In British Columbia that is strictly forbidden. Manitoba and Newfoundland side with Ontario. New Brunswick, PEI, and Quebec are with BC. The remaining provinces are silent or vague, not having laws specific to this issue.
What’s at stake are thousands of dollars in fees in an industry that averages just 4% profit. For multi-unit operators credit card fees on tips can quickly climb into the 5 or even 6 figure range. It’s vital to know what approach you can take in the region(s) you operate.
We’re implementing a new feature on BlackFox to allow for the recovery of credit card fees on tips (*where allowed by law).