Let’s call time on tipping

It was when we came to say goodbye that I realised I had turned from a valued customer into persona non grata. Wishing our waitress a good evening as we clutched our takeaway pizzas, we found her unwilling to meet our eyes, her electric American smile replaced by a sullen stare in the opposite direction.

Our crime? To have left a tip of only 15 per cent.

My friend — a fellow Brit — and I had ordered and sat down with two beers and a slice of bread, while waiting to collect our take-out at an Italian restaurant in Utah, where we were spending a few days of our holiday. We decided that 15 per cent would be a reasonable gratuity on our total bill for drinks and takeaway food.

But what would be regarded as generous — or unnecessary — in European eyes was taken as an insult by our waitress. It was clear we had blundered.

The tipping problem recurred again and again, easily the most stressful element in an otherwise wonderful holiday in the US. And it left me wondering why tipping is still so widespread — there and elsewhere.

Even in America, there is no standard experience. Often a restaurant will include “tip suggestions” on bills, doing the sums for the customers on gratuities at rates of 20, 22 and 25 per cent. In other places these might start at 15 per cent. In some restaurants, such as those in US hotels, the bill might come with a service charge incorporated (as it often does in Europe) but then offer an “additional tip suggestion” to those wanting to pay more. Some simply leave it all to the judgment of the customer.

Many service staff regard tips as a vital source of income. Others complain the system is exploited by managers to reduce their wage costs and would rather receive better pay.

In the US, tips are seen as part of the server’s wages, since the law allows businesses to pay so-called “tipped workers” less than the minimum wage if the difference is made up by tips. But this varies between states, with some requiring all staff — in receipt of tips or not — to be paid the minimum wage.

For the visitor, the rules are anything but clear. The confusion is greatest in coffee shops, where customers stand in a queue and pick up their own drinks, but baristas may often be low-paid “tipped workers” more likely to expect tips to make ends meet.

After three weeks I was still unable to discern whether I had inadvertently humiliated my servers or made a mug of myself by overpaying, adding cost to an already expensive trip. But in many venues it was clear that the view of tipping as a reward for good service had long been superseded by an expectation that customers are obliged to bolster staff wages.

International travellers have always had to judge when, where, to whom and how much to give. In Turkey, a modest tip in restaurants is appreciated, but is not customary for taxi drivers or in bars or cafés. In France, the law requires most restaurants to levy a 15 per cent service charge and waiting staff are entitled to pensions and other standard benefits, so any tip on top is seen as an “extra” reward, not an entitlement.

In Britain a similar service charge is commonly applied, but the rate varies. Research by trade magazine The Caterer found hospitality workers who received tips in 2019 made £29 a day on average in tips; while those working in London took £75 a day in tips.

What would a world without tipping look like? We don’t need to imagine this — we can travel to Japan, where tips are an exception and customers who try to offer a gratuity in a mainstream restaurant are more likely to cause offence.

This global variance in attitudes weakens the case for tipping by underlining its status as a historical quirk dating back at least to feudal times. But the best argument against it is that other areas of life work perfectly well without it. Would we want our doctor to rely on tips based on the accuracy of their diagnosis? Or the pilot of our passenger jet for a successful landing? We don’t, because we understand that a transparent salary is the best way of paying somebody for doing a good job.

The capacity of tipping to cause embarrassment for the visitor — or generate rancour between the server and the served — has been amplified by growing economic strains. The rising cost of living and the struggles faced by service industry companies and staff emerging from Covid lockdowns has added to the sense of jeopardy for customers and sharpened the potential for grievance among workers. Many people felt the need to support service industries that had been forced to shut down over lockdowns, but they themselves are now facing bigger bills, with inflation rising across the globe.

Restaurant managers will no doubt regard a call to ban tipping as a bad joke at a time when they are already asking customers to absorb some of the pain of rising food and wage costs. Without tips or service charges, the amount printed on the bill would have to rise. But customers know that their tab is going up, whether via tips or higher prices. If companies choose to pass on more of them as service charges, they are likely to see fewer clients.

Tipping is hardly a cost-free expense to businesses. It imposes an administrative burden, since gratuities are typically taxed and must be accounted for. In the UK, a so-called “troncmaster” — a manager, an outside specialist or one of the waiting staff — sets the distribution of the service charge between the front-of-house staff and the back-of-house chefs and kitchen workers (another source of friction) and ensures HM Revenue & Customs gets its take.

The US government also levies a federal tax on tip income — hence one New Yorker friend insists on calculating her tips using the pre-tax total printed on the bill. “I’m not tipping the government,” she argues.

Instead of fading away, though, tipping expectations are becoming more entrenched with the introduction of card and touchscreen payment technology.

In the past, a customer might throw notes and coins on to the table after paying the bill, leaving staff to collect them later, or put cash into a tips box at the till. Now, customers in the US are frequently presented with a touchscreen offering alternatives — three “suggested tips” at different rates, a customised tip option or “no tip”. 

This may speed up the transaction but it also makes the tip an unavoidable hurdle for customers to negotiate at the point of purchase, their server poised in front of them.

I am under no illusion: tipping is as likely to disappear in the short term as a New York steakhouse to go vegan. But we should be asking far more questions over its role as it creeps into tax policy and new payment technologies. In 100 years’ time, will we still be arguing over the tip?

James Pickford is deputy editor of FT Money. james.pickford@ft.com