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To tip or not to tip?

Posted by Ivana Rnjak on Oct 17, 2016 11:14:49 AM
Ivana Rnjak

Tipping – it’s a divisive issue. Discussing the pros and cons of tipping is kind of like discussing politics with your family – frustrating and really hard to tell who, if anyone, has the right answer.

Is the culture of tipping hospitality workers a good or bad thing? Because of the drastic differences in the practice of tipping around the world, there is no simple answer to this contentious question.

The US is a particularly interesting place to look into because tipping is so socially entrenched that when some restaurants tried to ban it in favor of higher wages, both customers and staff rallied against it. In the US, some argue tipping is a way to encourage better service and earn better wages than is possible through flat hourly rates, while others argue it is an outdated system that puts workers at risk.

We had a look at some of the arguments for and against tipping.


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What is Tipping?

Tips are voluntary additional payments made by a customer for a service received.

The culture of tipping largely exists for the hospitality industry. Customers add tips for the services of the staff that looked after them – primarily waiters and bartenders, though hotel staff such as concierges and cafe staff such as baristas are often tipped as well. This is the source of one of the main problems in tipping culture – who gets tipped and who doesn’t, and why.

How Does Tipping Work?

The etiquette around tipping varies from country to country.

In the US tipping is essentially obligatory – not legally, but there is a socially entrenched expectation to leave 15-20% of your bill as a tip for the server.

In most European countries and in some other places a tip is automatically included in the total bill price as a service charge.

In places like Australia it’s a play it by ear situation – if you’ve got some loose change, or if the service was particularly good then you leave a tip.

And then there are places where tipping is considered insulting, and some where it’s outright illegal and constitutes a bribe.



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Why Does Tipping Matter?

Tipping has an economic significance.

Tips can act as a bonus or as a supplement to wages. Depending on the job environment, tips may come in the form of a little extra something in the pocket, or they may make up a large portion of a worker’s weekly pay.

Tips are crucial for hospitality workers in the US who often earn a “tipped minimum wage” of $2.13/hour with the expectation that the tips they earn will see their take-home pay reach or exceed the minimum of $7.25/hour.

Tipping has a social significance.

Tips are part of an “economy of regard” – they serve as a way to say thank you for the wonderful service you’ve been provided with. But in the US this can’t really be the case because of the expectation to tip no matter the quality of service.

In this way tips have another social significance – we have come to regulate our behavior because we don’t want to look like jerks. So we pay the extra 20% not necessarily because of the service, but because we know how much that server is earning by the hour, or because we don’t want to look bad in front of our company.


How Tipping Culture Impacts the Hospitality Industry

On the surface tipping appears to be just a way to reward a server for a job well done. But there are many arguments in favor of and against this practice – especially in the US.

Some arguments around the culture of tipping:


Tipping encourages professionalism and improves service.

Given the possibility of earning an extra buck, tipping may act as an incentive for workers to give the best service.

But in the US where tipping is essentially mandatory, this argument doesn’t hold up as strongly as in other places. This argument also suggests that hospitality workers need this extra incentive to do a good job – whereas other industries don’t have this need. But the nature of the job does call for very personalized service, so the argument stands that a customer should have the opportunity to reward a server that has given them a particularly good experience.

Tipping privileges front of house staff and can lead to conflict in the workplace.

Distribution of tips varies from venue to venue, but across the board it is rare to see tips shared with back of house staff – cooks, kitchen hands, dishies.

This is a particular problem in the US as the wage disparity between a cook and a waiter can be massive, and often does not reflect experience or effort. This can put the industry at risk of losing skilled labor as back of house jobs become less appealing due to a combination of hard work with low pay.

The distribution of tips can also lead to workplace conflict – who gets how much and how it’s decided can be divisive issues. In venues where tips are pooled for use by everyone (such as staff parties), how the money finally gets used can often be a cause for conflict as well.

Tipping provides a better paycheck than the minimum wage.

The low rate of the American minimum wage means that working for the tipped minimum wage is usually a much better option than working for a set hourly rate without tips – even if that minimum was to be increased.

Recently, a number of venues in the US switched from a tipping system to paying their staff a higher wage – and in most of these venues, staff preferred to return to the old system. Customers were also unhappy as it meant paying more for the meal – essentially, the price was the same as with a tip, but the socially entrenched custom of tipping seems preferable to paying the same amount just to the venue.



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The culture of tipping transfers risk from the owner to the worker. 

Business owners in the US have a pretty sweet deal because of tipping culture. The wages they pay don’t put a huge dent in their pockets and the majority of the risk is put on the worker who suffers when not tipped properly (despite the social obligation, some people are just not going to tip, and some won’t tip the standard 15-20%) or when not given enough hours to earn those tips.

At the same time, working for the minimum wage often won’t earn enough either, so many workers are happy to take the risk because the tips they can potentially earn often far exceed the minimum wage.  

The changing nature of payment is influencing the tips we give.

The change from signature to PIN on credit card payments has had an impact on tipping in Australia and in the UK. An option to leave a tip through a PIN payment is possible, but venues have reported a drop in these kinds of tips as the payment process often feels rushed and happens directly in front of a server.

Tips don’t always end up where customers intended.

The pooling of tips in a workplace is common, and most customers assume that the tip they’ve left for a waiter might be shared with the bus-person. But customers don’t usually imagine their tip ending up in the business owner’s pockets. This can often happen when tips are left through credit card payments, but even money from tip jars can be taken by owners – and with little legal precedent to stop them (there is some case law in the UK around this issue, but not in Australia). There have been reports of owners using tips to fix up things around their venue or withholding tips as punishment. How the tip is paid and even where the tip is left (if it’s given directly to the server, or left on a table for example) can affect where that money ends up.

While the question of “to tip or not to tip?” may be a divisive issue that is influenced by differing factors around the world, one common factor links all arguments – the wellbeing of the staff who work hard to create good experiences.

Whether tipping persists or disappears, we should all work towards creating better working conditions for hospitality workers - as business owners, fellow staff members, and customers.  

Topics: Hospitality operations, Hospitality insights