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As a personal finance blogger, I watch where pretty much every penny goes, buy what’s needed and no more, etc. The one place where I DO splurge is on tips.

For those that don’t understand the concept;

Tipping: A tip (or gratuity) is a payment to certain service sector workers beyond the advertised price.

The Two Lines of Thought

I’ve heard two distinct lines of thought on tips 

   You Should Always Tip

This is the most common thought today about the subject. Usually the accepted amount is 10-15% of the bill, less for bad service, more for excellent service. No muss, no fuss, no confusion. Next is;

   You Should Never Tip

This is less prevalent, but based on the idea that the businesses employing the service staff should be required to pay a comparable wage to what employees outside the service industry (those that DON’T get tips) receive. The reasoning is based on the fact that it’s not uncommon to pay service staff considerably LESS hourly than normal, assuming that tips will make up the difference.

Example: Suzy Jones works at an average restaurant. She receives a salary of $2.15/hr plus tips. $2.15 is below ANY minimum wage law in the U.S., but service industry workers are EXPRESSLY excluded from the law. That means that Suzy must get the majority of her money from the customers coming into the establishment.

If there’s a slow evening, Suzy might not make $20-30 the entire shift. Far below the minimum-wage she would have gotten.

Behind-the-Scenes

Another thing to consider is that for larger establishments, notably casinos in my area, there is a practice of ‘tipping out’ the staff. What that means is that at the end of the evening, ALL the tips are combined and then divided up amongst all the staff working that evening.

In a bar situation, that means that the waitress that was just tipped an extra $20 from a customer, will have to contribute some of that money to the bartender(s) and barback(s) that were working with her. She doesn’t receive the entire $20. This is true also for any money tipped to either the bartender(s) or the barback(s), so it evens out somewhat.

Say that you leave a small tip because the waitress wasn’t very good. By leaving a small tip, you’re actually stiffing everyone along the supply chain that brought you your drink; the  bartender that made the drink, the barback that stocked the bar so the bartender could make drinks, and the waitress that brought you the drink. Everyone suffers, not just the waitress.

Why We Tip

The idea behind tipping is to encourage good service. By having pay based directly on the customer’s experience, theoretically the service persons should strive to do a better job. Do a good job, get more money.

   Happy customers = $Big $Tip.

Businesses like this because it’s better customer experience.

   Happy customers = Repeat Customers = More Profits.

While living in Europe in the 1990’s, I found that there were many places where tipping wasn’t used. The amount of the tip was actually built into the check automatically through VAT tax.

Now admittedly I only have my own experiences, but I did note a definite and consistent lack of service from what I’m used to in the U.S. To this day, I’m not sure whether it was just me (maybe I engendered bad service?) or because the tipping customs are different in Europe.

Why I Tip

I have a best friend in the service industry that has talked about tipping for years, how it makes up so much of their pay, and how important it actually is to the servers. I’ve never been in the service industry, so this is as close as I’ve come to seeing the "other side". So I try to act accordingly.

• I tip at LEAST 15% - Unless it’s spectacularly bad service. Once I left no tip after the waitress refilled my tea with water FOUR TIME and never asked me what I was drinking. It was a ’swoop-by’ filling.
• I tip at least $2.00 - Leaving 15% on a $5 bill doesn’t add up to much. If I’m going to show that I appreciate their service, I’m going to make it something they might appreciate. Pocket change is a joke.
• I try to make sure the waiter/waitress gets it - I know that in many instances they have to tip out, but I try to make sure I thank them directly (handing them a tip) to let them know I appreciate their service in a personal way.

It’s not the amount of money that’s the important thing to me, it’s the idea I can (hopefully) give someone some genuine appreciation for a good job.

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