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The Great ‘Tipping’ Debate

Posted in Business and Law, Society and Morals, and World Affairs

Americans are renowned to be generous tippers, but they have their own rules on tipping and it’s part of American life. Most grow up knowing what to tip, and expect them when they work. However, the concept of tipping in the traditional sense is supposed to be a bonus—a reward for excellent service and not a means to boost the below minimum wage some of the service jobs offer. Tipping shouldn’t be compulsory, but many people feel obliged to tip either for status reasons (they don’t want to look cheap) or because they know staff depend on the tips for their wages. Neither is right, because a tip should be deserved and not handed out through guilt. The industries that expect tips include; restaurant staff, hairdressers, taxi drivers, hotel porters, coach drivers, tour guides, beauticians, and bar staff. While this list seems to increase (in the US) where do you draw the line? I once went to see a psychic and he had a tip jar on his desk!

In France, a service charge is included in the bill so if you wish to tip in addition to that you are free to do so, whereas in Japan tipping is not expected and can be considered rude. The American tradition of tipping has its roots in the colonial times of the master and servant (slavery), where the servant was rewarded with a tip for good service, as an incentive to be discreet, and to pay in advance for favors. Not much has changed except workers do have minimum wages (that aren’t always enforced) and as tipping became the norm not only among the rich, but gradually became expected from anyone that used services. People tip and expect extras or preferential treatment, and allegedly a poor tipper will receive average or bare minimum standards. Is that right or even fair that someone who tips 5-10 percent less gets a lower level of service?

No country should be forced to accept or follow the American culture, but has tipping evolved to the point that people tip without understanding why they do it? Some UK businesses are falling into that trap, especially those that have American roots. Typically tips are welcomed, but not expected and good service should be given regardless. Recently some restaurants have begun to include a service charge, and the customer can choose to have it taken off or to add to it. Many won’t ask to remove it because it’s embarrassing and the restaurants know that, but I have done before and paid a tip I thought was appropriate. In general places will add 12-15 percent as a service charge, but the typical person adds 10 percent or rounds up rather than calculate a precise amount unlike the US, where people calculate a tip exactly.

Then there is the issue whether to leave the tip in cash (which is better for the person) or to add it on a card where the person may not be guaranteed the tip, and some places may deduct a handling fee. This was a recent bone of contention when it was discovered a popular chain called Pizza Express (that serves higher end pizzas) was deducting 8 percent in processing fees for any tips paid via a credit card. They have now changed this due to the bad publicity, and public protests and boycotts, and now state on their website how tips are handled:

“All cash tips go straight to your waiter. But credit card tips and our service charge tips are different. Tips made on electronic card payments are fully distributed among employees as agreed by the company’s Tronc committee, with no deductions. Currently, this independent group elects to give 30 per cent of card-based tips to cleaners, pizzaiolos and other kitchen staff; with the remaining 70 per cent going to the individual waiter as a reward for great customer service.”[1]

The culture in the US is different, and people use the system to their advantage while employers abuse the system too. In New York bussers can make $150 a night in tips which compensates for the lower minimum hourly wage, yet in a small town upstate that would be very different for a restaurant that didn’t have many covers. I’ve had friends and family that have worked as servers; in New York my cousin did well as she worked in high end restaurants (Indochine), but told me if people didn’t leave at least 20 percent they would run after them, and in a smaller city in Massachusetts, my friend said some days she would take home $35 a day that included tips and that was in the tourist season. Employers hire with a ‘work at will’ policy in that they can let someone go with no notice, or an employee can leave without notice and as such the wages reflect this unhealthy work practice. While there are minimum wage laws, many establishments pay a fraction of this and expect the rest to be made up via tips. Not only is this unfair, but it has become the norm as no one has dared challenge what is in effect unethical.

One hears tales of a server being paid about $2 an hour and that they rely on tips to make up the rest, but what if there are no tips, or it’s a quiet day and no one comes in? Is that fair that they don’t get paid still? The employer is supposed to make up the rest of the wage if there are no tips, but it is more likely that the server would be let go. The chances of someone reporting an employer of not making up their hourly rate is remote, hence why there is a fast turnover of staff in the industry. The law currently allows tips to be included as wages, and that is the main problem as in effect some servers work for zero dollars and only live off tips. Customers should not be responsible for paying the staff wages, but that is what it has come down to, and is one of the unwritten laws in American culture. I would rather they be transparent and write at the bottom of the menu that tips are compulsory to pay the staff wages—we all know that is the case, but no one dare say it, or a restaurant is too embarrassed to let the public know they don’t pay their staff the minimum wage.

Apparently in the US tipping 15 percent is considered the minimum, and they even calculate on the bill the different rates for you up to 25 percent. If you consider this in addition to state tax, it can nearly double the cost on a bill in some states. Having lived in both the US and UK, tipping can be a dilemma. There are some places that don’t accept tips, but they are currently in the minority. In the Waldorf Astoria in New York, the Guerlain Beauty Salon does not accept tips, and other high end places don’t as the view is that the service will be exceptional already and there is no need to tip.

The Fair Labor Standards Act (FLSA) in the US now requires a wage of at least $2.13 per hour be paid to employees that receive at least $30 per month in tips. If wages and tips do not equal the federal minimum wage of $7.25 per hour the employer is required to make up the difference. Therefore a tip cannot exceed $5.12 to be counted towards the hourly wage.[2]

7 States who pay a full minimum cash wage before tips:

California $10

Alaska $9.75

Oregon $9.75

Washington $9.47

Minnesota $7.75-$9.50

Nevada $7.25-$8.25

Montana $4-$8.05

States that pay above the federal minimum wage (although there are various restrictions):

Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Missouri, New Hampshire, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Vermont, Wisconsin, West Virginia.

17 States that pay the $2.13 federal minimum wage

Alabama*, Georgia, Indiana, Kansas, Kentucky, Louisiana*, Mississippi*, North Carolina, Nebraska, New Jersey, New Mexico, South Carolina*, Tennessee*, Texas, Utah, Virginia, Wyoming.

* States with no minimum wage laws.

The argument that restaurants would have to put up their prices if tips were abolished has little credibility. If you look at the breakdown of how the minimum wage for servers is paid across the US, the same chain would pay different rates across different states, but their prices would remain the same. It does mean potentially less profit for the establishments, but they may get better servers and ones that stay and don’t just go the place with the best tips. A good restaurant needs good servers, and they won’t get them if they don’t pay them fairly. The laws do acknowledge that tipped staff are open to abuse from employers, but how can states that have no minimum wage laws protect their workers from being exploited?

The term service charge would normally assume that includes a tip, however, that is not always the case. Establishments now use this to cover services such as the complimentary olives, or cloakroom, but some do include this as a tip to servers. Under the FLSA guidelines a service charge is defined as such[3]:

Service Charges: A compulsory charge for service, for example, 15 percent of the bill, is not a tip. Such charges are part of the employer’s gross receipts. Sums distributed to employees from service charges cannot be counted as tips received, but may be used to satisfy the employer’s minimum wage and overtime obligations under the FLSA. If an employee receives tips in addition to the compulsory service charge, those tips may be considered in determining whether the employee is a tipped employee and in the application of the tip credit.”

 It’s very possible a restaurant will add a service charge and then the diner must pay a tip too, thus this could easily double the cost of a meal in New York with state tax (8.87 percent) then a service charge (usually 12-15 percent) and then a tip about 20 percent. That’s 40 percent extra on top of the basic cost of the meal. Isn’t it easier to for establishments to quote a true cost rather than break it up? In recent times the term service charge no longer means that service is included in some restaurants, while it does in others. Italy, for example uses the term cover charge, which is a charge for the bread basket (whether you want it or not) and table water.

The infamous Applebee PR disaster occurred when in 2013 a diner who was in a party refused to tip the server when 18 percent was added, which was customary for parties of six or more. It happened in St. Louis, USA where Pastor Alois Bell crossed out the 18 percent tip and replaced it with 0 and wrote, “I give God 10% why do you get 18.”  A server (who wasn’t the actual server) decided to post it on Reddit. Unfortunately, Bell saw this and demanded that all the staff be fired for misconduct. The server, Chelsea Welch was fired, but public sympathy lay with her as people boycotted Applebees for their actions, and no one had sympathy for Bell, who said she did leave a $6 cash tip and apologized after unfavorable social media comments appeared about her behavior. It divided a nation where people blamed Applebees for paying below minimum wage, and it highlighted the unfair tipping system and how it affects workers. Some people still came out and claimed that people should expect to tip when they dine out or not go, and others brought up the issue of a minimum wage. It wasn’t only a class divide, but a North and South divide, where less sympathy appeared to come from the Midwest and Southern states.

Applebees_receipt_460

Applebees handled the whole situation badly, and still when the name is mentioned it is synonymous with the scandal. They could have warned the staff member instead of firing her, or increased the wages of staff once this was highlighted. As it is a franchise, it’s harder to implement across the board, but I doubt Applebees recovered, and as a chain that is more renowned for fast cheap food, it became or maybe still is a place to avoid on ethical grounds.

One shouldn’t tip because they feel obliged to—I’ve refused to tip a few New York cabbies; one never helped with putting my luggage in the trunk or to take it out (so why should I pay him an extra 15 percent), and another I asked to wait for a friend who was picking up a ticket and he refused, so I paid him with no tip and got out. Quite simply if the service is not beyond the minimum, then there is no reason to tip as far as I am concerned. Americans can tip all they want, and that’s their culture, but it’s not the law. When you pay for a service you should receive it, and it shouldn’t be conditional upon paying any extra. I find the view of those who say if you can’t afford to tip then don’t dine out narrow minded. These attitudes enable the flawed system that maintains staff to be underpaid. The general rule is to double the tax at least in the US, keep some singles handy, and don’t feel bullied into tipping if the service was bad. The rest of the world seems to be able to make a profit when they pay their staff minimum wages, and there is no reason why it can’t work in the US—the only reason is that they don’t want change.

[1] https://www.pizzaexpress.com/help-and-contact/where-do-my-tips-go

[2] https://www.dol.gov/whd/state/tipped.htm

[3] https://www.dol.gov/whd/regs/compliance/whdfs15.htm

 

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