Let’s talk about something that all of us have most likely complained about at least once recently: tipping. There have been plenty of social media posts, viral videos, and opinion pieces about how tipping has clearly gotten out of hand as even self-checkouts are prompting customers for tips. Let’s just say the effects of tip fatigue are very real.
It used to be that tipping 10% of your bill was the common etiquette at restaurants, but over the years that amount increased to 15% and even to 20% in some places. During the pandemic, many customers chose to increase their tip percentages to support service workers. However, as the service industry has returned to “normal” in many ways, expected tip amounts still remain higher than they were before the pandemic.
Technology has only helped contribute to tipflation. As new point-of-sale technology such as Toast and Square have emerged, the way customers leave tips has changed. Instead of filling out a line on a receipt or dropping coins into a jar, customers only have to tap a button to leave a tip. This has been found to not only increase the amount of overall tips received by businesses but the percentage as well.
As many of these devices prompt customers with suggested tip amounts – usually three – and additional buttons for ‘no tip’ or ‘custom tip,’ customers are more inclined to select one of the suggested amounts than the other two buttons. Additionally, research has shown that when businesses set the lowest default tip amount higher – for example starting at 18% instead of 15% – customers are more likely to tip higher amounts.
This technology has also made the act of not tipping go from a passive action to an active one by forcing customers to choose the ‘no tip’ option. Some have referred to this as ‘guilt tipping’ because most customers feel they don’t have a choice but to choose one of the prompted options, especially when the employee they are most likely tipping is standing right in front of them.
Not only has “tipflation” become a sore subject for consumers, but the phenomenon of tip creep – where more industries are asking for a tip at checkout whether or not they have tipped employees – has become a grievance as well. Typically tipping was reserved solely for service workers like waiters, hairdressers, and taxi drivers. However, with the rising cost of inflation and calls for higher pay, businesses in all kinds of industries see adding tips as an alternative to actually increasing wages. Of course, a company will claim that adding the option to tip is merely to reward employees for a job well done, but who is really benefiting in the end?
Additionally, some companies have begun to exploit the practice of tipping as a way to increase their own revenue, because laws that regulate tips don’t apply to machines. As one consumer told The Wall Street Journal last month, “They’re cutting labor costs by doing self-checkout. So what’s the point of asking for a tip? And where is it going?”
A major problem of both “tipflation” and tip creep is that it is causing tip fatigue among consumers. As customers are asked to tip at more businesses, they may begin to tip less to individual businesses, because they are tipping more overall. This means the employees that most rely on tips from customers, like waiters, are the most likely to suffer.
When reporting on this topic it is important to provide context to the situation by understanding the history of tipped employees along with the laws and regulations that apply to them. We’ll dive more into that next week.