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Tipping : Is it time to stop this custom? – Jan/Feb2016

Tipping : Is it time to stop this custom? - Jan/Feb2016

For many of our well-travelled readers, it will come as no surprise that tipping etiquette is different around the world. For example, in America tipping anything less than 20 percent at restaurants is considered bad manners, but across the pond in places like England and France, there’s generally no expectation of a tip for service. When I was in England, I learned quickly there was no need to tip at a bar.

Is tipping an out-of-date custom or is it still a relevant way to say “Thank you” for serving us so well. Some North American businesses want to eliminate tipping, but does it make economic sense?

Eliminating Tipping

A restaurateur in New York City, a place with arguably the most established tipping culture, wants to remove tipping from all restaurants. Danny Meyer’s is chief executive at Union Square Hospitality Group.

He recently announced they will be eliminating tipping at 13 restaurants operated by the company. Instead servers and staff will receive better hourly wages. To make this happen, prices will be increased and all menus will show that hospitality prices are included. The bills will no longer have a blank line to include tip. Customers will pay what they see. That’s it. Meyers believes this will help by providing more predictable and reliable wages and give his 1,800-plus employees more job security.

The Economic Impact

According to University of Guelph Associate professor Bruce McAdams, tipping brings $6-billion annually into Canada’s economy. McAdams teaches at the School of Hospitality and Tourism Management. He based that number on an average 15 percent tip rate at full-service restaurants across Canada. He says tipping for Canadians is a social norm and taking it away may prove to be difficult.

In 2014, a restaurant called Smoke and Water, in Parkville, B.C., attempted to eliminate tipping by doing much like Meyers is in New York. But they abandoned the effort after only three months when they discovered that customers didn’t like the idea of not having control over how much they could tip.

Canadians are Generous

In a survey of five major cities, the online travel rating site Trip Advisor found Canadians tip anywhere from 15 to 20 percent. That was the range it recommended to tourists visiting our country. Ottawans are the most generous tippers at 15.6 percent then its Montreal, Toronto Vancouver and Calgary. Calgarians tip on average only 13.3 per cent. Eliminating the custom of tipping would mean raising prices by that much in order for servers to feel like they are being adequately compensated.

Would Eliminating Tipping Work?

Getting rid of tips from establishments like restaurants, hair salons and taxi cabs would take a lot of courage from the individual companies. Business owners would have to feel confident that raising wages and increasing prices wouldn’t scare customers away.

Tipping in North America is much more established but has been criticized as an ineffective way to pay those who work in the service industry. In many cases, servers get lower wages because the expectation is they will make more money by collecting tips.

Economically, new rules would have to be established to raise the minimum wage of servers. There could also be tax implications for staff who may not be claiming all their cash tips in their annual salary. It’s one thing for a tourist to adapt to the tipping culture in a foreign city but it’s another kettle of fish when you try to change the habits of customers in their home town.

As finance editor for HOMES Publishing Group, Rubina Ahmed-Haq also shares her expertise in our sister publication Condo Life. In addition, she is a regular contributor on CBC Radio, blogger at RateSupermarket.ca and has her own website alwayssavemoney.ca