Tipping, Like Everything Else, is Changing Fast
The service industry is changing. Delivery and touch-less payments are just two examples of how technology, COVID, and a changing workforce have created shifts in the management of restaurants, bars, hotels, and more.
Tipping is also changing. Different structures of tipping are being used, and technology is changing how tipping is done, how it’s tracked, and how it’s distributed.
For today’s restaurant owner, there are many types of tipping. You need to understand these types, as well as the technologies and the current state of tipping, to keep your staff happy.
After all, with a happy team, you are more likely to have happy customers!
Virtually every aspect of the restaurant industry is changing. This includes tipping. In general, we are seeing the nature of tipping changing in two fundamental ways: a shift towards tip pools, and online payments creating adjustments in how people tip. (And how they feel about it!)
A Dip in the Tipping Pool
Pooling tips is not a new concept. But it is becoming more common, seen as a way to fairly (or at least equally) distribute the tip money that customers provide. Essentially, the tip pool is when all tips are pooled together at the end of a shift and distributed evenly across the entire staff or team. Instead of one server or bartender keeping all the tips they earn, everything is combined and divided evenly.
This can be a good practice for cafes and other businesses where each ticket is smaller in size (a high number of low-priced tickets), as well as businesses where multiple people are working on a single order. Cashiers and baristas, for example, often pool the tips and split evenly, as both are doing an equal share of work.
Benefits of Pooling Tips?
Traditionally, tips were reserved for the people doing customer-facing work, especially bartenders and servers. Pooling upends that tradition, giving everyone a stake in the customer’s positive experience.
Tip pooling can also create better teamwork, and is often seen as a more equal way to handle tip money. It does not seem fair that one server gets the big, high-tipping table while the other gets the small, low-tip customer. This structure evens those perceived differences.
Downside of Pooling Tips?
The downside is that services and customer-facing employees have less incentive to deliver a truly outstanding experience. Why go the extra mile, when you’ll only get a fourth of the cash brought in by this customer?
Managers implementing a tip pool can also expect push-back from high-quality, high-earning servers who are used to keeping everything they earn.
Current State of Tipping: Online Payments
Online payments, card-only payments, and touch-less payments have also changed tipping. Tipping, just like regular payments, no longer uses cash. Instead, it uses cards and online billing to complete the transaction.
Many POS systems have automatic tip requests. At the end of a transaction, customers are asked if they would like to give a tip, then given a few options for tip size. (10%, 15%, 20%, etc.) This could increase tipping totals, but can also annoy customers who don’t feel tipping is appropriate. It changes the dynamic. Tipping used to be an added bonus; now it’s standard practice. The customer, if they don’t want to tip, literally has to say so; before they could simply not tip.
Tipping on the Decline?
With online and mobile payments, it would seem likely that tipping would increase. After all, customers are not dispensing physical cash, but simply pressing a button on their phone. However, a survey from CreditCards.com found that tipping is in a slight decline.
According to their survey, Americans tipped more in 2020 and 2021 to support service industry workers who lost wages through the pandemic. However, that commitment appears to have cooled, as tipping percentages are on the decline. For example, in 2019 the percentage of U.S. adults who said they always tip servers at sit-down restaurants was 77%. That number has dipped to 75% in 2021 and 73% in 2022. In 2021, 17% of respondents said they always tip when picking up food; that number has declined to 13% in 2022.
To be fair, this is only a small decline. It’s possible that with inflation consuming a larger chunk of American budgets, tipping has declined. When the economy begins to improve, it seems likely that tipping will grow as well.
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