Is Tipping Culture Wrong?

An insider’s opinion on gratuity-based wages.

There is tipping in coffee shops, Ubers, and—most notably—restaurants and bars.

The topic of tipping (also known as gratuity) divides industry veterans. It divides based on roles—back-of-house (chefs, cooks and stewards) versus front-of-house (servers, bartenders and hosts). It’s the start of an often ugly conversation about who does more for the restaurant—the prep cook or the server? The host or the bartender? Who deserves more money?

In 2015, Danny Meyer abolished tipping at his Union Square Hospitality Group, only to reverse that decision this past July in the face of plummeting revenues thanks to COVID-19.

In the hospitality industry, margins are razor-thin on a good day. Labor makes up a considerable part of an operator’s budget, even in tipped establishments. And now, restaurants are facing unprecedented challenges from pandemic lockdown requirements. So why bother changing the tipping status quo?

A good server or bartender knows their amount of hustle often predicts how much they will earn. The more tables they take, the more they sell, the higher their earnings. It’s also typically a measure of skill: how well they know their products, their menu, and their craft.

Basing wages off of gratuity is a tough proposition, however. There are wild swings—from legendary nights with baller parties, to quiet Sundays with scarcely a soul in the building. An experienced front-of-house hospitality worker knows how to average their earnings and calculate an hourly rate that they can expect to target.

If queried, most old-school GMs and hospitality operators would probably give a negative response to the idea of switching to a wage-based workforce.

“Our job is to keep the lights on,” they’d say. “We give you a section; that section is your own little business. Everyone starts out with the same number of covers. We try to make things fair.”

Should restaurants change?

The mentality of a young, impressionable server is not that of a self-advocate. They know their bosses don’t really owe them anything. In some cases, it’s a badge of honor to get a chance to work at a prestigious restaurant with a renowned kitchen and bar. Often, as students or adults going through life changes, they feel lucky to work at a popular place where they can make great money. In fact, in large, cosmopolitan cities it’s not uncommon for waitstaff in fine-dining to make upwards of six figures.

Now, older and wiser, having seen behind the curtain, many servers are turned off from hospitality by poor management and the everyone-for-themselves attitude that exists at inefficiently run establishments.

Here’s where the problem arises—an intrinsic lack of accountability and consistency. On one events contract, a client may pay for a built-in flat labor rate. But on another contract, the operator will reverse himself, offering the client the opportunity to add a gratuity that is split among a pool of workers. Events managers jump through insane hoops to secure business for their calendars. Their imperative is to close big bookings and buyouts; they don’t stop to think about staff earnings. Excuses and shrugs are common: after all, the client is the one in charge. Unless there’s a change in the gratuity structure, XYZ party won’t book an event. The customer is always right.

Being too flexible—it’s a problem.

Adaptability is a virtue. So is flexibility. But there is a time in business where someone asks an employee to stray from standard operating procedure. So much time is wasted trying to meet unreasonable guest expectations and accommodate what should be very easy challenges to refuse.

These challenges come in a variety of forms. Asking for an extra pour of alcohol. Demanding a better table. Insisting that they bring in an outside bottle of wine free of charge.

Staff will turn to leadership for help. After all, they’ve been trained that the guest’s happiness is tied to their income. In the case of giving away alcohol, such a demand is actually illegal. Then the server actually experiences a moment of anxiety.

“ If I don’t give them what they want, they won’t tip me.”

The crux of the problem.

“Some restaurant servers recognize that stereotypes regarding customers’ tipping habits can set in motion a self-fulfilling cycle by affecting the service they provide, and in turn, the tips they receive from those customers.”

—Professor Liu-in Wang, University of New Mexico School of Law

By entering the hospitality industry, we expect to serve. We expect to make our place of work feel like home to all of our guests. But when that service comes with strings attached, suddenly the MO changes from service to servitude.

There’s a reason why tending bar and waiting tables has a negative connotation in the US. It’s implied, through tipping culture, the guest is subject to a guilt-based shakedown for additional money. An unfair burden is then placed on the guest, and it tarnishes the value of the server’s work.

Instead of being seen as an honorable professional where a love of craft, dedication to service, and element of showmanship are appreciated, American restaurants have invented an entire segment of the labor force dependent on the largesse of others to survive.

That dependence seeds a host of problems. Michael Lynn, a professor of Economics and Hospitality at Cornell, has written dozens of papers on tipping culture in America and across the globe. In his findings, only half of service staff in the US feel that their tips had something to do with their performance. He found instead that most servers feel that their tip percentage had something to do with their appearance. For example, female servers who rated themselves as “attractive” had better tip percentages. Blondes did better than brunettes. Slim women and better-endowed women earned higher averages too. So, what does that say about how superficial value judgements affect gratuity? In these tipped environments, Lynn found that workers are exposed to higher levels of sexual harassment and inappropriate behavior from guests. And, even more disturbing, he found that: “…black servers earned less than white servers for comparable levels of service.”

It would be nice to say that these results seem exaggerated or are outliers. But they’re not. They are supported by cold, hard data. There is plenty of anecdotal evidence as well. The reality is, management is often forced to intercede in situations where inappropriate guest behavior leads to the threat of impacting what is, in actuality, the server’s livelihood.

In a perfect world, a server or bartender spends time with a guest to enhance their experience. It varies by establishment and venue. Typically, in sit-down, upscale restaurants, a server invests significant time and effort into learning a menu, a wine list, or how to serve your soufflé with crème anglaise perfectly. They do these things for a living but also for the simple pleasure of delighting and inspiring the guest. They help make lasting memories on special occasions, celebrations and first dates that will be cherished for years to come.

Recall the last dinner with loved ones, sharing a special bottle of wine. Or even just an amazing loaf of bread that didn’t have to be cooked at home. Anyone who has ever been to a restaurant and wished that the night could go on forever, has experienced the spirit of hospitality.

What about sharing?

There is a darker side to the tipping issue as well—wage exploitation. Wage theft takes many forms: not paying for overtime work, failing to properly distribute tips, and withholding paychecks, among others. Malleable business practices open the door to wage theft, as they do not clearly stipulate what a worker should expect to earn for their time and effort. The restaurant industry is a huge offender in this regard, and in 2016 owed an estimated $39 million in back wages.

Tip-pooling, the practice of collecting and re-distributing tip revenues among the entire staff, has long been contentious, with the debate leading to a ban by the Department of Labor under the Obama administration in 2011.

“Pooled houses” are generally disliked by staff. In this system, everyone is paid a portion out of the night’s earnings in tips based on how many hours they worked. The pooled house still relies on a tipped mentality and disincentivizes less-motivated members of the team to work. They also require complete honesty, transparency, and trust—something that is an extra burden on management to enforce.

Transparency in Pricing

One of the reasons that tipping culture survives in the US is the lack of pricing transparency on the menu. There are target profit margins in place for a reason—after all, the venue needs utilities, maintenance, supplies and to pay their management and kitchen staff. But the question remains....why do American restaurants expect the guest to bear a 20% surcharge on the check after taxes to offset their labor costs?

Operators will say: “We encourage tipping to keep prices low, so we can attract more guests to dine with us.” My challenge to them: what about streamlining your concept? Do you really need ten entrees? What about twelve different wines by the glass? If simplicity and discipline is practiced in the back office, what improvements can be leveraged?

Wine service is a great example. Wine is generally a fixed-cost item. As a guest, you already pay a markup of 300% to purchase the wine at the restaurant. Is it fair to expect a guest to pay 20% gratuity on top of that? Some guests refuse to tip on wine. Many industry people would say, “Well, bottle service is important to the guest experience.” And it is...but what could restaurants do to build labor into the cost of the wine? With responsive point-of-sale (POS) and inventory systems, it’s easier than ever to track individual wine sales per server. With a little creative thinking, restaurants could use cost-saving technology to their advantage.

Feeling of Obligation

In 1800’s Britain, patrons of a restaurant would give the Maître d'hôtel a coin or two to ensure they received preferential service. The practice evolved, becoming common at upscale dining establishments and hotels. Eager to copy any fashionable European trend, Americans adopted tipping as well soon after the Civil War. Immediately, employers took advantage of this trend to pay their employees substandard wages, forcing them to rely on tips for income. By the 1950’s, tipping culture was reinforced in travel magazines, which urged international visitors to leave an extra 10% gratuity for waitstaff.

Today, the average tip percentage is 18%, with restaurants the highest end of the spectrum sometimes commanding 25% gratuities on the entire check. Some patrons may feel glad to pay an additional amount for what they feel is “good” service.

The payment process is a true pain point in the restaurant industry. All the rapport a server has spent the last two hours instilling in a guest comes screeching to a halt when the check hits the table.

Now the guest has to stop, analyze her entire experience, and decide what percentage of tip the server deserves. She has to weigh the possibility of being judged based on the amount she leaves. If she tips 10%, she has a problem with her experience. 15% could be interpreted as apathy or miserly behavior. 18-20% is now the expectation from the server if service is flawless from their end.

In my opinion, this expectation is wrong.

Because in reality, any gratuity is a gift on the part of the guest.

Yet, US tipping culture places an extra expectation on the guest, forcing them into a guilt-based decision which brings unnecessary negativity into the dining experience. No matter how amazing the experience, it’s just a little extra sting when that guest pulls out their credit card.

Can the industry change?

According to Zagat, 43% of Americans are comfortable with abolishing tipping, even if that means seeing higher menu prices. I expect that number will only continue to grow in a post-COVID landscape. Now that restaurants are changing their models to accommodate reduced capacity limits and to-go business, their staffing requirements will change. Predictably, restaurant owners will be forced to change their menu dynamics too.

More Americans are working past trepidation about eating out in a post-COVID landscape. Roughly one quarter of Americans are experiencing trouble paying their bills. It’s time for a restaurateur reality check.

The hospitality industry is faced with a once-in-a-lifetime opportunity to embrace widespread adjustments to American tipping culture. They can choose to embrace an all-inclusive model that benefits everyone, from front-of-house servers to the cooks manning the grill. I believe that the right creative solution exists. A more balanced wage structure would pave the way for regular paychecks, employer-sponsored benefits, and a predictable stream of income for staff.

Personally, I would prefer never again to hear a guest described as  “big tipper.” How about a “genuinely nice human being?” Waitstaff should not size up guests, trying to gauge how much money they can earn from a given table. They should be focused on doing their jobs well—making each guest feel at home. If the atmosphere right, money will follow.

Abolishing tipping culture in the US is the first step toward legitimizing different professions in the hospitality industry. There is still work to be done, more details to clarify. But let’s work to remove this practice once and for all.