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The Pros and Cons of Eliminating Tipping

Tipping was not always the norm in the United States. In fact, people first started tipping shortly after the Civil War when wealthy Americans picked up the act during their travels in Europe. And, even at this point people found issues with it – some even said the notion of leaving a tip is anti-democratic. Some states went so far as to pass anti-tipping laws, but they were short lived, and overtime, tipping became the norm.

In my opinion, leaving a tip is not a problem. It is meant to show thanks for the service you received and reward superior work. My issue is rather with the way the system has grown up around the notion of a tip – instead of it being an extra acknowledgement of thanks, or a means “To Insure Promptitude,” (the acronym for which the word “tip” was derived), tips have become the foundation for the compensation algorithm of the food service industry.

Here are some of the problems associated with tipping:

1. Customers May Not Understand How Tipping Works

It wasn’t until I began working in the restaurant industry that I truly appreciated how tips worked. As I watched the closing manager reconcile the books every evening, I saw how tips were counted in total, instead of per server. Consumers often do not have insight into this process - they tend to think the level of the tip will either serve as a thank you or not to their individual server. Customers also tend to give tips based a standard percentage, irrespective of the service they received.

2. Tips No Longer Serve Their Founding Purpose 

While some consumers do not using tipping appropriately, a restaurant's service staff may not adjust their service to earn a better tip. While this is of course a gross generalization, I believe that on a whole, good servers will continue to be good servers if you eliminate tipping, and poor servers, well, they won’t likely get worse. It's unclear whether this is a function of pooled tips and the belief that one’s hard work will just support others, or that tips aren’t seen as a response to individual service. Perhaps it is a combination of both issues.

3. Back-of-House (BOH) Isn't Always Included in Tip Pools

This is the big one. In New York State, by law, BOH employees are not eligible to participate in the tip pools or receive individual tips, despite their direct contribution to the revenue from a given table (i.e., the number from which tip percentage is typically calculated). Such a large percentage of a diner’s experience has to do with the food and the quality of the preparation, but no one in the BOH is monetarily recognized for superior or sub-par performance. The pay gap between Front-of-House (FOH) and BOH continues to expand, and as a result, talented young cooks are less inclined to enter the kitchen when they know they could make more money as a server.

Noting these issues and the fact that tipping “has created a two-tiered wage system” with deep social and economic consequences for millions,” we are starting to see an industry shift to eliminate tipping. While this transition will resolve a lot of these problems with tipping, it creates its own set of injuries.

The Pros and Cons of Eliminating Tipping

The Pros

Eliminating tips will contribute to increased wages for BOH employees, and attract top culinary talent. It will also put an end to “shift chasing,” as someone working a slow afternoon lunch will make as much as an equivalent employee working a busy Saturday night. From a financial perspective, menu prices will represent a more accurate value of the entire dining experience, and pay will reflect experience and seniority.

The Cons

As for the cons of eliminating tipping, servers and other FOH employees will not be able to be incentivized or measured for their performances. Although tipping does not do a good job of measuring true FOH performance, it is better than nothing. Restaurants will need to work to put an alternate system in place that surpasses tipping in its ability to measure performance and incentivize superior work. Even with new forms of monetary incentives in place, there is a potential for servers to earn less than they are currently making, causing attrition of FOH employees.

From the consumer perspective, price sensitive customers may be turned off from the higher menu prices. Even though they historically would have added on additional money for tip, this is something that is not typically factored into ordering decisions. Even as a very aware customer, I had to remind myself (and my dining companions) about the inclusion of service in menu prices during a recent meal where we were commenting on how pricey some of the items were. In the end, our bill was about average for a party of our size and the quantity of food we ordered.

This is going to take time and require customer education. Restaurants need to find ways to engage their guests more to ensure they understand why the decision was made and how it will ultimately impact their meal – both in terms of the level of service they receive and the money they will spend.

Overall, I believe that the benefits outweigh the risks, and we will all be better off without tipping. But in all fairness, I will acknowledge that this is easier said than done - with innovative compensation, incentive packages and appropriate customer engagement, it can be achieved.

About the Author: Andrea Oran

Andrea has spent most of her career working in various facets of the food & beverage industry, with an emphasis on restaurant operations, including work with Union Square Hospitality Group, Calle Ocho, La Pecora Bianca, and other New York City restaurants. Andrea is a graduate of both the Culinary Institute of America and Cornell University's School of Hotel Administration, and she is pursuing her MBA at Columbia Business School.

About Servy

Headquartered in New York, NY, Servy is a next generation mystery dining platform. Unlike traditional secret shopping, Servy diners for their meal, providing restaurants with organic feedback from their target clientele. Servy helps restaurants measure performance, understand consumer preferences, and ensure standards are upheld at all times.

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