A gratuity (also called a tip) is a sum of money customarily given by a client or customer to a service worker, in addition to the basic price. Tipping is commonly given to certain service sector workers for a service performed or anticipated. Depending on the country or location, it may be customary to tip servers in bars and restaurants, taxi drivers, hair stylists and so on.
Tips and their amount are a matter of social custom and etiquette, and the custom varies between countries and settings. In some locations tipping is discouraged and considered insulting; while in some other locations tipping is expected from customers. The customary amount of a tip can be a specific range of monetary amounts or a certain percentage of the bill based on the perceived quality of the service given.
In some circumstances, such as with U.S. government workers and more widely with police officers, receiving gratuities (or even offering them) is illegal: they may be regarded as bribery. A fixed percentage service charge is sometimes added to bills in restaurants and similar establishments. Tipping may not be expected when a fee is explicitly charged for the service.
From a theoretical economic point of view, gratuities may solve the principal-agent problem (the situation in which an agent, such as a server, is working for a principal, such as a restaurant owner or manager) and many managers believe that tips provide incentive for greater worker effort. However, studies of the real world practice show that tipping is often discriminatory or arbitrary: workers receive different levels of gratuity based on factors such as age, sex, race, hair color and even breast size, and the size of the gratuity is found to be only very weakly related to the quality of service.
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Etymology and history
According to the Oxford English Dictionary, the word "tip" originated as a slang term and its etymology is unclear. According to the Online Etymology Dictionary, the meaning "give a small present of money" began around 1600, and the meaning "give a gratuity to" is first attested in 1706. The noun in this sense is from 1755. The term in the sense of "to give a gratuity" first appeared in the 18th century. It derived from an earlier sense of tip, meaning "to give; to hand, pass", which originated in the rogues' cant in the 17th century. This sense may have derived from the 16th-century "tip" meaning "to strike or hit smartly but lightly" (which may have derived from the Low German tippen, "to tap") but this derivation is "very uncertain". The word "tip" was first used as a verb in 1707 in George Farquhar's play The Beaux' Stratagem. Farquhar used the term after it had been "used in criminal circles as a word meant to imply the unnecessary and gratuitous gifting of something somewhat taboo, like a joke, or a sure bet, or illicit money exchanges."
The practice of tipping began in Tudor England. "By the 17th century, it was expected that overnight guests to private homes would provide sums of money, known as vails, to the host's servants. Soon afterwards, customers began tipping in London coffeehouses and other commercial establishments".
The etymology for the synonym for tipping, "gratuity", dates back either to the 1520s, from "graciousness", from the French gratuité (14th century) or directly from Medieval Latin gratuitas, "free gift", probably from earlier Latin gratuitus, "free, freely given" . The meaning "money given for favor or services" is first attested in the 1530s.
In some languages, the term translates to "drink money" or similar: for example pourboire in French, Trinkgeld in German, drikkepenge in Danish, and napiwek in Polish. This comes from a custom of inviting a servant to drink a glass in honour of the guest, and paying for it, in order for the guests to show generosity among each other. The term bibalia in Latin was recorded in 1372.
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Tronc
A tronc is an arrangement for the pooling and distribution to employees of tips, gratuities and/or service charges in the hotel and catering trade. The person who distributes monies from the tronc is known as the troncmaster. When a tronc exists in the UK, responsibility for deducting pay-as-you-earn taxes from the distribution may lie with the troncmaster rather than the employer. The word "tronc" has its origins in the French for collecting box. In June 2008, the Employment Appeals Tribunal ruled in a UK test case (Revenue and Customs Commissioners v Annabel's (Berkeley Square) Ltd) that income from a tronc cannot be counted when assessing whether a wage or salary meets the national minimum wage.
By region
Africa
Nigeria
In Nigeria tipping is not so common at upscale hotels and restaurants because service charge is usually included in the bill though the employee seldom get this as part of their wages. In recent times however, the service provider usually coerce the customer for tips in a subtle manner. There have been reported cases of security guards asking bank customers for tips.
Asia
China
In China, traditionally there is no tipping. However, hotels that routinely serve foreign tourists allow tipping. An example would be tour guides and associated drivers.
In Hong Kong, tipping is not typically expected at hotels or restaurant establishments, where a "service charge" of 10% is added to a bill instead of expecting a gratuity. Taxi drivers in Hong Kong may also charge the difference between a fare and a round sum as a "courtesy fee" to avoid making change for larger bills.
One exception, where tipping is accepted is in Macau, previously a colony of Portugal.
Japan
In Japan, tipping is not a part of the culture. It is not expected and can cause confusion. Like many other countries in East Asia, Japanese people see tipping as insulting.
India
In India tipping is popular in whole market. As well in recent year it's making trending day by day.
Indonesia
In Indonesia tipping is common in large tourist areas, such as Bali or Lombok. 10% is expected at full-service restaurants. Bar tipping is discretional and depends on the style of a bar: in Bali, most bars are owned by expatriates and, normally, expat's country of origin reflects the style of a bar. Pubs do not expect tips. Restaurants - 10% to 15%. High end bars accepts over-the-counter cash tips in any amount. Massage parlous, which are located practically on every corner in Bali, expect 10%-20%. Taxi drivers expect 5%. Bellboys at high end hotels expect around $1 per bag.
Malaysia
In Malaysia tipping is not the norm (but donation is!) and is not expected in any service. Instead restaurants can add a service charge of 10% to the bill. In Malaysia the people are familiar with tipping, so if a person does leave a tip then it is accepted and appreciated. When tipping occurs it is usually done by rounding up the bill.
South Korea
Tipping is not customary in Korean culture, and tipping is not expected in general service industry. Some people even regard tipping as an inappropriate behavior. High-end hotels and restaurants often include service charge between 10% to 15%, but it is always included in the bill and customers are not expected to leave separate gratuity for servers beyond what is included in the bill.
Singapore
In Singapore, tipping is insulting. People may mistake it as a bribe, which is a chargeable offence that could result in jail time. Bars and restaurants typically add a 10% service charge, which is compounded by the 7% Goods & Services Tax, although it is not given to the wait staff. This already makes an additional 17.7% to the restaurant bill. Tips are generally not given anywhere. Taxi drivers given tip will mistaken it for excess cash and return exact change.
Taiwan
In Taiwan, tipping is not customary, but all mid and high end restaurants include a mandatory "10% service charge", which is not given to the service staff, but rather considered by Taiwanese law as general revenue, as reported by the Taipei Times in "False Gratuity" on July 9, 2013.
Europe
Albania
Tipping (bakshish) in Albania is very much expected almost everywhere. In recent times it has become more common, as many foreigners and Albanians living abroad visit Albania. Leaving a tip of around 10% of the bill is customary in restaurants; even porters, guides and chauffeurs expect tips. Duty-free alcohol is often used as a type of tip for porters, bellhops and the like, however some people (such as Muslims) can find it offensive.
Croatia
Tips (napojnica, man?a, tip) are sometimes expected, mostly in restaurants - but they are not mandatory. Restaurant tips are around 3-5%(or more). In clubs or café bars, on the other hand, it is common to "round up the bill". It is not common to tip taxi drivers or hairdressers.
Denmark
Tips (drikkepenge, lit. "drinking money") are not required in Denmark since service charges must always be included in the bill by law. Tipping for outstanding service is a matter of choice, but is not expected.
Finland
In Finland tipping is not customary and never expected.
France
Cafés and restaurants include a 15% service charge in the bill, as required by French law for tax assessment. Service compris indicates that the tip has been added to the bill, but sometimes the wait staff do not receive any of it. Tipping is better received in venues accustomed to tourists, but can be treated with disdain in smaller food establishments and those in more rural areas. The amount of the tip is also critical. A 5% tip will do nicely for good service. For superior service in higher-end eating establishments, a more generous tip would not be out of place. However, the rare waiter/waitress accustomed to more generous foreign customers have no problem receiving a tip of up to 10% or more.
Austria and Germany
Tipping (Trinkgeld) is not seen as obligatory. In the case of waiting staff, and in the context of a debate about a minimum wage, some people disapprove of tipping and say that it should not substitute for employers paying a good basic wage. But most people in Germany consider tipping to be good manners as well as a way to express gratitude for good service.
It is illegal, and rare, to charge a service fee without the customer's consent. But a tip of about 5% - 10%, depending on the type of service, is customary. For example, Germans usually tip their waiters but almost never the cashiers at big supermarkets. As a rule of thumb, the more personal the service, the more common it is to tip. Payments by card can include the tip too, but the tip is usually paid in cash when the card is handed over.
At times, rather than tipping individually, a tipping box is set up. Rounding up the bill in Germany is commonplace, sometimes with the comment stimmt so ("keep the change"), rather than asking for all the change and leaving the tip afterwards. Or the customer says how much he will pay in total, including the tip: thus if the basic price is EUR10.50, the customer might, rather generously but not unusually, say zwölf ("twelve"), pay with a EUR20 note and get EUR8 in change. When paying a small amount, it is common to round up to the nearest euro (e.g. EUR1.80 to EUR2.00).
Sometimes a sign reading Aufrunden bitte ("round up please") is found in places where tipping is not common (like supermarkets, clothing retailers etc.). This requests that the bill be rounded up to the nearest EUR0.10. This is not to tip the staff, but a charity donation (fighting children poverty), and completely voluntary.
In Germany tips are considered as income, but they are tax free according to § 3 Nr. 51 of the German Income Tax Law.
Hungary
The Hungarian word for tip is borravaló (literally "money for wine", a loose calque from German: Trinkgeld) or colloquially baksis (from Persian: ?????? bakhshesh), often written in English as backsheesh. Tipping is widespread in Hungary, the degree of expectation and the expected amount varies with price, type and quality of service, also influenced by the satisfaction of the customer. Like in Germany, rounding up the price to provide a tip is commonplace.
Depending on the situation, tipping might be unusual, optional or expected. Almost all bills include service charge - similarly, some employers calculate wages on the basis that the employee would also receive tips, while others prohibit accepting them. In some cases a tip is only given if the customer is satisfied, in others it is customary to give a given percentage regardless of the quality of the service, and there are situations when it is hard to tell the difference from a bribe. Widespread tipping based on loosely defined customs and its almost imperceptible transition into bribery is considered a main factor contributing to corruption. A particular Hungarian case of gratuity is hálapénz ("gratitude money") or paraszolvencia, which is the very much expected - almost obligatory though illegal - tipping of state-employed physicians (Hungary's healthcare system is almost completely state-run and there is an obligatory social insurance system).
Iceland
In Iceland tipping (þjórfé, lit. "serving money") is not customary and never expected. Foreign tourists sometimes still tip without thinking because that is the custom in their home country. Tourist guides in Iceland also sometimes encourage their guests to tip them, but there is no requirement to do so.
Ireland
It is uncommon for Irish people to tip taxi-drivers or cleaning staff at hotels, although it is common to tip porters, particularly at upmarket hotels. In mid to high-end restaurants it is expected, unless a service charge is included in the bill. In bars it is more common, but not expected. Tips are often given to reward high quality service or as a kind gesture. Tipping is most often done by leaving small change (5-10%) at the table or rounding up the bill.
Although it has been cited that tipping taxi drivers is typical, it is not common in practice.
Italy
Tips (la mancia) are not customary in Italy, and are given only for a special service or as thanks for high quality service, however it's really uncommon. Almost all restaurants (with the notable exception of those in Rome) have a service charge (called coperto); waiters do not expect a tip since they are already fairly paid, but will not refuse it, especially from foreign customers. In cafés, bars, and pubs it is not uncommon, on paying the bill, to leave the change, saying to the waiter or to the cashier "tenga il resto" ("keep the change"). Recently tip jars near the cash register are becoming widespread, however in public restrooms they are often forbidden. Leaving the change is also quite common with taxi drivers. When using a credit card, it is not possible to add manually an amount to the bill; instead one can leave some coins as a tip.
Norway
Service/service charge is included in the bill. It is uncommon for Norwegians to tip taxi-drivers or cleaning staff at hotels. In restaurants and bars it is more common, but not expected. Tips are often given to reward high quality service or as a kind gesture. Tipping is most often done by leaving small change (5-15%) at the table or rounding up the bill.
Oslo Servitørforbund and Hotell- og Restaurantarbeiderforbundet (The Labor Union for Hotel and Restaurant Employees) has said many times that they discourage tipping, except for extraordinary service, because it makes salaries decrease over time, makes it harder to negotiate salaries and does not count towards pensions, unemployment insurance, loans and other benefits.
The Netherlands
Tipping (fooi) in the Netherlands is not obligatory and it is illegal, and rare, to charge a service fee without the customer's consent. However it is made to believe that tipping is required in restaurants, bars, taxis and hotels (bar, restaurant, maids and bellboys). If service was normal or poor, it is normal not to tip, while guests who receive good to excellent service can tip in a 5-15% range, with an average of 10% and exceptionally 20% if service was unparalleled. Around 1970, regulations were adopted that all indicated prices must include a service charge. As a result, all prices were raised by about 15%. This was called "service compris". Also wages were adjusted that employees were not dependent on tips.
Romania
The amount of the tip (bac?i?) and method of calculating it will vary with the venue and can vary from 1-2 RON to 10% of the bill. The tips do not appear on bills and are not taxed. If paying by card, the tip is left in cash alongside the bill. While tipping is not the norm, servers, cabbies, hairdressers, hotel maids, parking valets, tour guides, spa therapists et al. are used to receiving tips regularly, and are likely to consider it an expression of appreciation for the quality of the service (or lack of it). If offering a tip, 5-10% of the bill is customary, or small amounts of 5, 10 or 20 RON for services which are not directly billed. For other types of services it depends on circumstances; it will not usually be refused, but will be considered a sign of appreciation. For instance, counter clerks in drugstores or supermarkets are not tipped, but their counterparts in clothing stores can be.
Tipping can be used proactively to engender favor, such as getting reservations or obtaining better seats. However, care should be taken for it not to be seen as a bribe, depending on circumstances. While tipping is overlooked in Romania, bribery is a larger issue which may have legal consequences. There is an ongoing aversion about both giving and receiving tips in coins, due to the low value of the denominations. It is best to stick to paper money. Offering coins can be considered a rude gesture and may prompt sarcastic or even angry remarks.
On the other hand, the coin handling aversion has resulted in the widespread practice of rounding payments. This is not technically a tip, and as such is not aimed primarily at the individual at the counter, but rather at the business. Nevertheless, if done with a smile it can be seen as a form of appreciation from the customer towards the clerk. Etiquette demands that one of the parties offers the change, but the other can choose to tell them to keep all or part of it. Small businesses may sometimes force the issue by just claiming they are out of change, or offering small value products instead, such as sticks of gum; this is considered rude and it is up to the customer to accept or call them out for it. The reverse can also happen, where the clerk does not have small change to make for the customer's paper money, but chooses to return a smaller paper denomination and round down in favor of the customer, in exchange for getting them through faster. The latter usually happens only in the larger store chains.
Russia
In Russian language a gratuity is called chayeviye, which literally means "for the tea". Tipping small amounts of money in Russia for people such as waiters, cab drivers and hotel bellboys was quite common before the Communist Revolution of 1917. During the Soviet era, and especially with the Stalinist reforms of the 1930s, tipping was discouraged and was considered an offensive capitalist tradition aimed at belittling and lowering the status of the working class. So from then until the early 1990s tipping was seen as rude and offensive. With the fall of the Soviet Union and the dismantling of the Iron Curtain in 1991, and the subsequent influx of foreign tourists and businessmen into the country, tipping started a slow but steady comeback. Since the early 2000s tipping has become somewhat of a norm again. However, still a lot of confusion persists around tipping: Russians do not have a widespread consensus on how much to tip, for what services, where and how. In larger urban areas, like Moscow and St Petersburg, tips of 10% are expected in high-end restaurants, coffee shops, bars and hotels, and are normally left in cash on the table, after the bill is paid by credit card; or as part of cash payment if a credit card is not used. Tipping at a buffet or any other budget restaurant, where there are no servers to take your order at the table (called stolovaya) is not expected and not appropriate. Fast food chains, such as McDonalds, Chaynaya Lozhka, Kartozhka and so on, do not allow tipping either. Tipping bartenders in a pub is not common, but it is expected in an up-market bar. Metered taxi drivers also count on a tip of 5%-10%, but non-metered drivers who pre-negotiate the fare do not expect one. It should also be noted that the older Russians, who grew up and lived most of their lives during the Soviet era, still consider tipping an offensive practice and detest it. In smaller rural towns, tipping is rarely expected and may even cause confusion.
Slovenia
Tipping is not common in Slovenia, and most locals do not tip other than to round up to the nearest Euro. Recently, areas visited by many tourists have begun to accept tips of around 10 - 20%.
Spain
Tipping (propina) is not generally considered mandatory in Spain, and depends on the quality of the service received. In restaurants the amount of the tip, if any, depends mainly on the kind of locale, higher percentages being expected in upscale restaurants. In bars and small restaurants, Spaniards sometimes leave as a tip the small change left on their plate after paying a bill. Outside the restaurant business, some service providers, such as taxi drivers, hairdressers and hotel personnel, may expect a tip in an upscale setting. In 2007 the Minister of Economy, Pedro Solbes, blamed excessive tipping for the increase of the inflation.
Sweden
Tipping (dricks) is commonly not expected, but is practiced to reward high quality service or as a kind gesture. Tipping is most often done by leaving small change on the table or rounding up the bill. This is mostly done at restaurants (less often if payment is made at the desk) and in taxis (some taxis are very expensive as there is no fixed tariff, so they might not be tipped). Less often hairdressers are tipped. Tips are taxed in Sweden, but cash tips are not much declared to the tax authority. Cards are heavily used in Sweden as of the 2010s, and tips paid by cards in restaurants are regularly checked by the tax authority. There are reports that restaurant owners keep card tips and that waitresses do not notice generous card tips.
Turkey
In Turkey, tipping, or bah?i? (lit. gift, from the Persian word ????, often rendered in English as "baksheesh") is usually optional and not customary in many places. Though not necessary, a tip of 5-10% is appreciated in restaurants, and is usually paid by "leaving the change". Cab drivers usually do not expect to be tipped, though passengers may round up the fare. A tip of small change may be given to a hotel porter.
United Kingdom
Tips of 10% are common in restaurants, but not compulsory. Sometimes, more often in London and other large cities than in other areas, a service charge may be levied, often of 12.5%. Since it is a legal requirement to include all taxes and other obligatory charges in the prices displayed, a service charge is compulsory only if it is displayed, or the trader makes their presence clear verbally, before the meal. Even so, if the level of service is unacceptable, and in particular it falls short of the requirements of the Supply of Goods and Services Act 1982, the customer can refuse to pay some or all of a service charge.
The service charge may be included in the bill or added separately. 12.5% is reported as a common amount. Tipping for other services such as taxis and hairdressers is not expected, but tips are often given to reward good service. In some large cities tips are given to both taxi drivers and hairdressers/barbers, but again this is not expected.
Cash tipping bartenders in a pub is not recommended and not expected. Instead, a practice of "A Drink for Yourself" is considered to be polite and traditional. In this instance, a patron would not tip the barman/barmaid for the first or second drink; however, he might offer to buy them a drink after having a third drink himself. They would have the option either to actually pour themselves a drink and have it behind the bar (legal and common in UK) or to keep the price of one drink of his choosing in cash. This practice is at the discretion of patron and could be exercised after one or two drinks, instead of three, if preferred. Leaving cash tips on the counter at a pub is considered rude and inappropriate.
North America and The Caribbean
Canada
Tipping is practiced in Canada in a similar manner to the United States. Quebec provides alternate minimum wage schedule for all tipped employees. Some other provinces allow alternate minimum wage schedule for "liquor servers". According to Wendy Leung from The Globe and Mail, it is a common practice in restaurants to have servers share their tips with other restaurant employees, a process called "tipping out." Another newspaper refers to this as a tip pool. "Tipping out the house (the restaurant) is occasionally explained as a fee for covering breakage or monetary error[s]."
A Member of the Ontario Provincial Parliament, Michael Prue, has introduced a Bill in the Ontario Legislature regarding tipping. On December 7, 2015 it was reported that "Ontario is banning employers from taking a cut of tips that are meant for servers and other hospitality staff." "The Protecting Employees' Tips Act makes it illegal for employers "...to withhold their employees' tips, except temporarily if they are pooling all of the gratuities to redistribute them among all employees."
Canadian Federal tax law considers tips as income. Workers who receive tips are legally required to report the income to the Canada Revenue Agency and pay income tax on it. In July 2012, The Star reported that CRA is concerned with tax evasion. An auditing of 145 servers in four restaurants by CRA mentioned in the report uncovered that among 145 staff audited, CDN $1.7million was unreported. In 2005, The CRA was quoted that it will closely check the tax returns of individuals who would reasonably be expected to be receiving tips to ensure that the tips are reported realistically.
Caribbean
Tipping in the Caribbean varies from island to island. In the Dominican Republic, restaurants add a 10% gratuity and it is customary to tip an extra 10%. In St. Barths, it is expected that a tip be 10% to 15% if gratuity isn't already included.
Mexico
Workers in small, economy restaurants usually do not expect a significant tip. However, tipping in Mexico is common in larger, medium and higher end restaurants. It is customary in these establishments to tip not less than 10% but not more than 15% of the bill as a voluntary offering for good service based on the total bill before value added tax, "IVA" in English, VAT. Value added tax is already included in menu or other service industry pricing since Mexican Consumer Law requires the exhibition of final costs for the customer. Thus, the standard tip in Mexico is 11.5% of the pre-tax bill which equates to 10% after tax in most of the Mexican territory, except in special lower tax stimulus economic zones.
A gratuity may be added to the bill without the customer's consent, contrary to the law, either explicitly printed on the bill, or by more surreptitious means alleging local custom, in some restaurants, bars, and night clubs. However, in 2012, officials began a campaign to eradicate this increasingly rampant and abusive practice not only due to it violating Mexican consumer law, but also because frequently it was retained by owners or management.
If a service charge for tip ("propina" or "restaurant service charge") is added, it is a violation of Article 10 of the Mexican Federal Law of the Consumer and Mexican authorities recommend patrons require management to refund or deduct this from their bill. Additionally, in this 2012 Federal initiative to eliminate the illegal add-ons, the government clarified that contrary even to the belief of many Mexicans, that the Mexican legal definition of tips ("propinas") require it be discretionary to pay so that an unsatisfied client is under no obligation to pay anything to insure the legal definition of a tip is consistent with the traditional, cultural definition, and going as far to encourage all victims subject to the increasing illicit practice report the establishments to the PROFECO, the Office of the Federal Prosecutor for the Consumer, for prosecution.
United States
Tipping is a practiced social custom in the United States. Tipping by definition is voluntary - at the discretion of the customer. In restaurants offering traditional table service, a gratuity of 15-20% of the amount of a customer's check (15% or more in New York City) is customary when adequate service is provided. Buffet-style restaurants where the server brings only beverages, 10% is customary. Higher tips may be given for excellent service, and lower tips for mediocre service. In the case of bad or rude service no tip may be given, and the restaurant manager may be notified of the problem. Tips are also generally given for services provided in golf courses, casino, hotels, concierge, food delivery, taxis, spa and salons. This etiquette applies to bar service at weddings and any other event where one is a guest as well. The host should provide appropriate tips to workers at the end of an event; the amount may be negotiated in the contract. Tipping is not required for any service as it is voluntary.
The Fair Labor Standards Act defines tippable employees as individuals who customarily and regularly receive tips of $30 or more per month. Federal law permits employers to include tips towards satisfying the difference between employees' hourly wage and minimum wage, although some states and territories provide more generous provisions for tipped employees. For example, laws in Alaska, California, Minnesota, Montana, Nevada, Oregon, Washington, and Guam specify that employees must be paid the full minimum wage of that state/territory (which is equal or higher than the federal minimum wage in these instances) before tips are considered.
A tip pool cannot be allocated to employers, or to employees who do not customarily and regularly receive tips. These non-eligible employees include dishwashers, cooks, chefs, and janitors.
There is only limited information available on levels of tipping. A study at Iowa State University provided data for a suburban restaurant surveyed in the early 1990s. The mean tip was $3.00 on a mean bill of $19.78. As such, the mean tip rate was 16.1%, and the median tip rate was about 15%. In a 2003 research study at Brigham Young University, the sample restaurants had an average tip percentage ranging from 13.57 to 14.69% between 1999 and 2002.
According to the National Restaurant Association, only a handful of restaurants in the United States have adopted a no-tipping model and some restaurants who have adopted this model returned to tipping due to loss of employees to competitors.
Service charges
Service charges are mandatory payments, typically added by caterers and banqueters. A service charge is not to be confused with a tip or gratuity which is optional and at the discretion of the customer. Restaurants commonly add it to checks for large parties. Some bars have decided to include service charge as well, for example in Manhattan, New York. Disclosure of service charge is required by law in some places, such as in State of Florida A standard predetermined percent, often ~18%, is sometimes labeled as a "service charge".
History
Until the early 20th century, Americans viewed tipping as inconsistent with the values of an egalitarian, democratic society. Also, proprietors regarded tips as equivalent to bribing an employee to do something that was otherwise forbidden, such as tipping a waiter to get an extra large portion of food. The introduction of Prohibition in 1919 had an enormous impact on hotels and restaurants, who lost the revenue of selling alcoholic beverages. The resulting financial pressure caused proprietors to welcome tips, as a way of supplementing employee wages. Contrary to popular belief, tipping did not arise because of servers' low wages, because the occupation of waiter (server) was fairly well paid in the era when tipping became institutionalized.
In spite of the trend toward tipping as obligatory behavior, six states, mainly in the South, passed laws that made tipping illegal. Enforcement of anti-tipping laws was problematic. The earliest of these laws was passed in 1909 (Washington), and the last of these laws was repealed in 1926 (Mississippi). Some have argued that "The original workers that were not paid anything by their employers were newly freed slaves" and that "This whole concept of not paying them anything and letting them live on tips carried over from slavery."
Taxation
Tips are considered income. The entire tip amount is treated as earned wages with the exception of months in which tip income was under $20. Unlike wages where payroll tax (social security and medicare tax) are split between employee and employer, the employee pays 100% of payroll tax on tip income and tips are excluded from worker's compensation premiums in most states. This discourages no-tip policies because employers would pay 7.65% additional payroll taxes and up to 9% worker's compensation premiums on higher wages in lieu of tips.
Research finds that consistent tax evasion by waitstaff due to fraudulent declaration is a concern in the US. According to the IRS, between 40% and 50% of tips to waiters are not reported for taxation. Employers are responsible for Federal Unemployment Insurance premiums on tips paid directly from customers to employees, and this encourages employers to collaborate in underreporting tips.
U.S. federal employees
The U.S. Government recognizes tips as allowable expenses for federal employee travel. However, U.S. law prohibits federal employees from receiving tips under Standards of Ethical Conduct. Asking for, accepting or agreeing to take anything of value that influences the performance of an official act is not allowed.
South America
Bolivia
Service charges are included with the bill. A tip of around 5% or so is sometimes given, and is considered polite.
Paraguay
Service charges are included with the bill, and tipping is uncommon.
Oceania
Australia
Tipping is not expected or required in Australia. This is because the federal government protects the rights of workers, by providing them with a minimum wage. In Australia this is reviewed yearly, and as of 2017 it was set at A$17.70 per hour (A$22.125 for casual employees) and this is fairly standard across all types of venues. Tipping at cafés and restaurants (especially for a large party), and tipping of taxi drivers and home food deliverers is again, not required or expected. However many people tend to round up the amount owed while indicating that they are happy to let the worker "keep the change".
There is no tradition of tipping somebody who is just providing a service (e.g. a hotel porter). Casinos in Australia--and some other places--generally prohibit tipping of gaming staff, as it is considered bribery. For example, in the state of Tasmania, the Gaming Control Act 1993 states in section 56 (4): "It is a condition of every special employee's licence that the special employee must not solicit or accept any gratuity, consideration or other benefit from a patron in a gaming area". There is concern that tipping might become more common in Australia.
New Zealand
Tipping is not a traditional practice in New Zealand, though has become less uncommon in recent years - especially in finer establishments. Tipping in New Zealand is likely the result of tourists visiting from tipping cultures (such as the United States of America) who may follow their own tipping customs. Where tipping does occur among New Zealanders it is usually to reward a level of service that is in excess of the customer's expectations, or as an unsolicited reward for a voluntary act of service. A number of websites published by the New Zealand government advise tourists that "tipping in New Zealand is not obligatory - even in restaurants and bars. However, tipping for good service or kindness is at the discretion of the visitor". A Sunday Star-Times reader poll in 2011 indicated 90% of their readers did not want tipping for good service to become the norm in New Zealand
Perspectives
Inconsistency of percentage-based gratuities
In countries where tipping is the norm, such as in the US, Canada, and in a few countries in Western Europe, some employers pay workers with the expectation that their wages will be supplemented by tips. Some have criticized the inherent "social awkwardness" in transactions that involve tipping, the inconsistency of tipping for some services but not similar ones, and the irrationality of basing tips on price, rather than the amount and quality of service (a customer pays a larger tip to a server bringing him a lobster rather than a hamburger, for example). Also in countries where tips are not paid by most but where many do, managers tell new waiters that the salary might not be so high but there will be tips, meaning that waiters get little payment from those who don't pay tips.
Inconsistency between different culture among tourists
Some people, such as from the US, are used to always pay tips, and often do so even when they visit countries where this is less of a norm. Opposite, tourists from such countries might forget to pay tips when they visit countries such as the US where tips are expected.
Discrimination
In the Freakonomics blog entitled Should Tipping be Banned? Stephen Dubner and Steven Levitt discussed the issue of gratuities. The authors pointed out that research by Michael Lynn found that "attractive waitresses get better tips than less attractive waitresses. Men's appearance, not so important". Lynn's research also found that "blondes get better tips than brunettes. Slender women get better tips than heavier women. Large breasted women get better tips than smaller breasted women". A woman server interviewed for the blog stated that she "lost my job because my manager said that I didn't fit the look of the company, or the restaurant. So I don't know if it was because I'm a lot more curvier than the other girls or because my skin is darker. I don't know".
Lynn states of tipping: "It's discriminatory. Yes, and the Supreme Court has ruled that even neutral business practices that are not intended to discriminate, if they have the effect of adversely impacting a protected class are illegal. And so it's not inconceivable to me that there will be a class-action lawsuit on the part of ethnic minority waiters and waitresses claiming discrimination in terms of employment. And it's conceivable that tipping might be declared illegal on that basis".
Poor tippers
Some categories of people have been shown statistically to be poor tippers.
Cases where no gratuity is expected
Tipping may not be expected when a fee is explicitly charged for the service. In countries such as Australia and Japan where no tipping is provided, the service is found to be as good as in America.
Mandatory tipping
A service charge is sometimes added to bills in restaurants and similar establishments. Attempts to hide service charge by obstructing the line on the receipt have been reported.
In the United States, criminal charges were dropped in two separate cases over non-payment of mandatory gratuities. Courts ruled that automatic does not mean mandatory. Some cruise lines charge their patrons $10/day in mandatory tipping; this does not include extra gratuities for alcoholic beverages.
Bribery and corruption
Bribery and corruption are sometimes disguised as tipping. In some developing countries, police officers, border guards, and other civil servants openly solicit tips, gifts and dubious fees using a variety of local euphemisms.
Economic theory
A 2009 academic paper by Steven Holland calls tipping "an effective mechanism for risk sharing and welfare improvement" which reduces the risk faced by a service customer, because the customer can decide whether or not to tip. Tipping is sometimes given as an example of the principal-agent problem in economics. One example is a restaurant owner who engages servers to act as agents on his or her behalf. In some cases, "[c]ompensation agreements [can] increase worker effort [...] if compensation is [...] tied to the firm's success" and one example of such a compensation agreement is waiters and waitresses who are paid tips. Studies show however that, in the real world, the size of the tip is only weakly correlated with the quality of the service and other effects dominate.
Source of the article : Wikipedia
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