Why Eliminating Tips Is Counterintuitive

To tip or not to tip? That’s a question that has perplexed customers from the beginning of time.

Some restaurateurs have recently taken away this anxiety, along with the need for math skills, by eliminating tips in their establishments. Instead of tips, they compensate their waitstaff with higher wages.

We seem to hear a lot of opinions from consumers and restaurant owners about eliminating tipping, but how about the servers themselves? For tipping to be eliminated industry-wide, waitstaff will need to buy in.

So what do we know about these employees who receive gratuities?

Servers are motivated by money. Serving and bartending are tough. The work can be physically demanding, the hours are long, the workweek is unconventional, and the public can be difficult.

The primary motivation for holding these jobs is that they pay well. Yes, you need a passion to provide great service, but you could do that at a local department store without having to clock out at 2 a.m. on a Sunday. The sacrifice warrants a reward.

Servers are risk-takers. We surveyed some of our students at Johnson & Wales University who are professional servers, asking them if they would prefer a steady hourly rate over the uncertainty of tips. All of them indicated they preferred tips, with many mentioning the actual amount of money they can make on a busy Friday. 

When asked about a dead Tuesday, they again mentioned the bonanza on Friday.

Servers are entrepreneurial. This same group of students indicated that they worked hard to provide great service and to upsell because of the direct financial benefit to them. They preferred working alone and expected to benefit from their effort.

Servers are transitory. So many servers are really something else: students paying their way through school, out-of-work accountants looking to make ends meet until the next accounting job comes along, teachers looking to supplement their income or stay busy during the summer. They want to make as much money as they can until they can move on.

We also surveyed hospitality professionals—both management and waitstaff—for their thoughts. The survey was posted on targeted digital and social media sites; hard copies were also distributed to attendees at select seminars at the 2016 Nightclub & Bar Convention and Trade Show in Las Vegas.

Here’s what we learned: nearly 77% of the survey respondents indicated that they had a generally unfavorable opinion regarding the elimination of tips. In fact, tipped employees really hate the idea of eliminating tips (89% unfavorable); managers just hate it (72% unfavorable).

Perhaps even more significant, only one in four would stay in their current position if a tipped wage were eliminated. Forty-percent indicated that they would seek out an establishment with tipping, while another 25% would simply leave the industry.

And nearly half of our respondents suggested the quality of service they provide would diminish if they were not working for tips. Just 3% anticipated improving the level of service if not working for gratuities.

What we learned is that an organic shift away from the tipped wage for service employees is unlikely. The great majority of industry-constituent groups—customers, owners and managers, and tipped employees—don’t like the idea.

The few locations where restaurateurs have eliminated tipping tend to be in cities and states with a unique set of conditions, especially a higher-than-average minimum wage and a shortage of skilled kitchen employees.

If the elimination of tips is to come any time soon, it will most likely be driven by policymakers increasing the minimum wage and eroding the tip credit. This will make it difficult all over to attract skilled hourly employees to work in restaurants.

To tip or not to tip—that is the question for restaurant owners and managers, as well as legislators contemplating increasing the minimum wage. 

Brian J. Warrener and Paul Bagdan are faculty members at the Johnson & Wales University School of Hospitality in Providence, RI.

3 Comments

  1. Gavin Lange Reply

    If you want to pay $20 for a cheeseburger don’t tip and see how long that will take to arrive. Prices will go up. Service will regress and time consuming. Employee turnover would be costly with training with constant new faces not knowing regulars and there special requests. Even with higher wages the pay scale would never come close to what you can make including min wage and tips. Skilled professional service industry employees will be almost impossible to find not being able to work and live in many cities like San Francisco. Payroll for employers would have to triple at least to find qualified servers/bartenders.

  2. Vince Holland Reply

    LEAVE IT ALONE!

  3. Vince Holland Reply

    LEAVE IT ALONE; TIPS HAVE WORKED FOR YEARS AND YEARS AND THE RESTAURANT BUSINESSES ARE FORTUNATE TO HAVE CUSTOMERS ASSIST IN PAYING THEIR EMPLOYEES.
    ALSO, GAVIN’S COMMENTS ARE RIGHT ON.

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