As we parted ways, I realized I had gone from a valued customer to a… persona non grata. We wished our waitress a good evening as we held our takeaway pizzas, we found her unwilling to meet our eyes, replacing her electric American smile with a sullen look in the opposite direction.
Our crime? To have left a tip of only 15 percent.
My friend – a fellow Brit – and I ordered and sat down with two beers and a slice of bread while we waited to collect our takeout at an Italian restaurant in Utah where we were spending a few days of our vacation . We decided that 15 percent would be a reasonable tip on our total drink and takeaway bill.
But what would be considered generous – or unnecessary – in European eyes was considered an insult by our waitress. It was clear we had made a mistake.
The tipping issue came up again and again, easily the most stressful element in an otherwise great vacation in the US. And I wondered why tipping is still so widespread – there and elsewhere.
Even in America there is no standard experience. Often times, a restaurant will include “tip suggestions” on bills, with customer tip amounts calculated at rates of 20, 22, and 25 percent. In other places, these can start at 15 percent. In some restaurants, such as those in hotels in the US, the bill may include a service charge (as is often the case in Europe), but then offer an “additional tip suggestion” to those willing to pay more. Some just leave it to the customer’s discretion.
Many service employees consider tips to be an important source of income. Others complain that the system is being exploited by managers to lower their wage costs and would rather receive better wages.
In the US, tips are considered part of the server’s pay, as the law allows companies to pay so-called “tipped employees” less than the minimum wage if the difference is offset by tips. But this varies between states, with some requiring all staff — with or without tips — to be paid minimum wage.
For the visitor, the rules are anything but clear. The confusion is greatest in coffee shops, where customers queue to pick up their own drinks, but baristas are often low-paid “tip workers” who are more likely to expect tips to make ends meet.
After three weeks, I was still unable to discern whether I had accidentally humiliated my servers or made a mug of myself by overpaying, adding to the already expensive trip. But in many locations, it was clear that the concept of gratuities as a reward for good service had long been superseded by the expectation that customers would be required to raise staff wages.
International travelers have always had to assess when, where, to whom and how much to give. In Turkey, a modest tip is appreciated in restaurants, but is not customary for taxi drivers or in bars or cafes. In France, the law requires most restaurants to charge a 15 percent service fee, and waiters are entitled to pensions and other standard benefits, so any tip is seen as an “extra” reward, not an entitlement.
A similar service charge is often applied in the UK, but the rate varies. Research by trade journal The Caterer found that hospitality workers tipped in 2019 earned an average of £29 per day in tips; while those working in London received £75 a day in tips.
What would a world without a tip look like? We don’t have to imagine this – we could travel to Japan, where tipping is an exception and customers trying to offer a tip at a regular restaurant are more of an offense.
This global variation in attitudes weakens the case for tips by underscoring 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 just fine without it. Would we want our doctor to rely on tips based on the correctness of their diagnosis? Or the pilot of our passenger plane for a successful landing? We don’t, because we understand that a transparent salary is the best way to pay someone for good work.
The ability to tip to embarrass the visitor — or cause resentment between the server and the servants — has been enhanced by mounting economic tensions. The rising cost of living and the difficulties facing service businesses and staff emerging from Covid lockdowns have heightened the sense of danger to customers and sharpened the potential for complaints among employees. Many people felt the need to support service industries that were forced to close due to lockdowns, but are now facing higher bills themselves as inflation rises around the world.
Restaurant managers will no doubt view a call to ban tipping as a bad joke at a time when they are already asking customers to take some of the pain of rising food and labor costs. Without tips or service charges, the amount on the bill should go up. But customers know their tab is going up, whether it’s tips or higher prices. If companies choose to pass on more of it as a service fee, they are likely to see fewer customers.
Tipping is hardly a free expense for companies. It comes with an administrative burden as 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 wait staff – determines the distribution of service costs between the front-of-house staff and the back-of-house chefs and kitchen workers ( another source of friction) and ensures that HM Revenue & Customs gets its act together.
The US government also levies a federal tax on tip income—which is why a New York friend insists on calculating her tips based on the pre-tax total shown on the bill. “I don’t tip the government,” she argues.
Rather than fading, however, expectations for tipping are becoming more entrenched with the introduction of card and touchscreen payment technology.
In the past, a customer may have dropped notes and coins on the table after paying the bill, allowing staff to pick them up later, or cash in a tip box at the register. Now customers in the US are often presented with a touchscreen with alternatives: three “suggested tips” at different rates, a custom tip option or “no tip”.
This can speed up the transaction, but it also makes the tip an unavoidable hurdle for customers to negotiate at the point of purchase, their server is ready for them.
I’m under no illusions: tips will disappear in the short term as much as a New York steakhouse will go vegan. But we should be asking a lot more questions about its role as it creeps into tax policy and new payment technologies. Will we still be arguing about the tip in 100 years?
James Pickford is deputy editor of FT Money. james.pickford@ft.com