Why Tipping Hurts…Everybody

Why Tipping Hurts…Everybody

James Sandrini 6th October 2017

Tipping in the UK has become prevalent in most major cities.

In the nation’s capital, a surcharge for service is so pervasive that you can now tip your Deliveroo rider before they even know that they are due to bring you dinner.

The temptation is to assume that tipping is generally a positive transaction for all parties: A cathartic process for consumers that want to reward their server, a financial incentive for the team member providing the service and a motivating tool for the business owner, both in recruitment and on-the-job performance.

Everybody Wins. Except, They Don't.

We can disregard the question of taxation here – that matters, but you can read about that anywhere – and instead, let’s dissect the virtuous relationship between guest, team and business owner.

For the sake of clarity, we also need to split service charge from other tips. Tipping in the UK is still a choice; removing service charge is morally reprehensible (according to my regular dinner partners at least).

The Guest

If service charge is included, then why do people tip? Three reasons:

1. Because we are not particularly comfortable with our role in being served, an issue exacerbated by technological development (i.e. the increase in e-commerce, chat bots and peer-to-peer platforms). Basically, we are not ‘served’ in the way that we were once used to, or at least not as often, and are more aware that servitude is a reminder of a caste-bound old world that we would all rather leave behind.

2. To show how much we appreciated the experience we just enjoyed. Nothing odd here, but we are prone to follow our inherent biases to favour people ‘like us’ when it comes to tipping which, as a result, marginalises minority workers. Unsettling, but true.

3. To show off. You might be on a lunch date or auditioning for a new job over dinner; if you need to impress, you might just tip a bit more. That’s decent of you, even if it is a hollow gesture.

Each of the rational trio above possesses inherent issues, but at least we are in some control of our role in it.

Service Charge is Not Really Optional

Service charge, ubiquitous as it has now become, is only really up for grabs if something calamitous occurs.

Unfortunately, many a restaurant or bar manager still believes that removing service is adequate recompense for poor service (there are other ways to deal with these complaints); herein lies the dilemma.

Service charge is a tax on choice.

“You want to come to a place like this? Then you have to pay 12.5% extra for the privilege.” If you disagree, I ask you to review your restaurant or bar forecast for the year ahead: Does it include a near-full supplement of service charge gratuity? Thought so.

The consumer, from the very moment they interact with your brand, is fed a half-truth. Yes, the salmon dish, emblazoned all over Instagram, praised in your Timeout review, featured on your website and listed on the menu, is £14, but only until you actually want someone to bring it to your table. That costs extra.

And what happens to the money they are handing over? If you do not provide an answer to that question that satisfies your team, then be sure that they are telling a less-than-lovely story to your guests when that question inevitably arises.

The Team Member

There is little better than receiving positive, face-to-face feedback from a customer. Adding cash to the equation shouldn’t affect how often guests positively comment on their experience, but it does.

Gratitude is replaced by a contrived, mathematical contract. ‘Did table 12 leave a tip?’ I hear my waiter saying to their colleague, while I sit on what must be table 11. ‘Wait, £4 is like…5%…why bother…’ The promise of a tip can help to keep an unruly team in check and, at the very least, hawkish over bill payments. It also provides guests, particularly new ones, with a no-brain-needed gratuity baseline to follow. There are merits to this contract, even if performance and performance-related pay do not necessarily correlate.

The greater problem, however, is that every team member is now reliant on the payoff. Rather than any gratuity being a welcome addition – and something to be earned – service charge is just ‘a part of the bill,’ increasingly paid by card and anonymously applied to the daily takings. No special service necessary. And no real recollection of who left what either.

And, on the occasions when a guaranteed income bump would most help (hello January), then service charge tends to be at its lowest ebb. The same waiter or bartender that was so prized in December can now barely afford to work with you come the new year. No wonder then, that hospitality employee turnover peaks in the first month of the year.

"Service charge is a tax on choice"

The Business

If it is bad for your guests and team then it is, by default, bad for your business. But let’s lay it on thick with a few extra pitfalls:

– A few guests will take to social media or review sites to voice their displeasure that the bill was inflated. This is obviously negative, avoidable press

– Some employees will steal cash tips. It happens. This creates tension and leads to mistrust between members of the team, slowing service and impacting retention

– Most employees will think that their share of service charge and tips is below what it should be. A lack of transparency is often the cause (there is that trust thing again) but even the most open method still belies a far more primal concern:

– All of your employees think they are underpaid for their part in the guest experience. This often falls on chefs and back of house team members that, even with a higher basic wage, regularly take home less than a new bartender or waiter

– All restaurants and bars that charge for service spend time and money managing their TRONC system. This is time spent in an office, away from your guests and your team

There are more. If we haven’t covered the negative effect of tipping in the UK that most affect your business, email and tell us.

What Can You Do About It?

Don’t ban tips. I mean, sure, if you want to, go for it, but that does not cure the ill of tipping culture. Let’s review the challenge:

– Guests can feel trapped and conned by service charge but want the facility to recognise and thank your team for an excellent experience

– Employees expect gratuity to make up a part of their wage to the detriment of their service standards and tend not to trust the way tips are handled by the business

– Business owners and operators invest time, money and effort to manage a system that is, at best, imperfect, while suffering team turnover and guest dissatisfaction

The solution:

– Pay each team member the salary they deserve  (or at least were due to earn inclusive of service charge). You will recruit and retain greater talent

– Allow your team to institute a policy for cash tips that they deem fair. Stay out of it, save your time, money and effort and give the team a trust-building project to manage

Sounds…doable. So far.

Now, stay with me until the end here:

Increase menu prices to include the 12.5% that you were adding as service charge anyway.

If you’re still reading this, then chances are that you can see the operational, reputational and human capital advantages associated with the concept. Great, but don’t miss out on a chance to turn a decent idea into a great one:

– Market that your business is no longer adding service charge and that guests are free to tip as they see fit (alongside your new tipping policy) in the spirit of transparency

Consumers have never been keener to know where their money goes, just as they are desperate to know where their food and drink come from. Tipping in the UK will continue to be a major point of contention, especially in the wake of recent revelations. Get ahead of this declining curve, advocate a fair supply chain and stop the pain, now.