Sum of money customarily tendered to service sector workers
A gratuity (often called a tip) is a sum of money customarily given by a customer to certain service sector workers such as hospitality for the service they have performed, in addition to the basic price of the service.
Tips and their amount are a matter of social custom and etiquette, and the custom varies between countries and between settings. In some countries, it is customary to tip servers in bars and restaurants, taxi drivers, tattoo artists, hair stylists and so on. However, in some places tipping is not expected and may be discouraged or considered insulting. The customary amount of a tip can be a specific range or a certain percentage of the bill based on the perceived quality of the service given.
It is illegal to offer tips to some groups of workers, such as U.S. government workers and more widely police officers, as the tips may be regarded as bribery. A fixed percentage service charge is sometimes added to bills in restaurants and similar establishments. Tipping may not be expected when a fee is explicitly charged for the service.
Giving a tip is typically irreversible, differentiating it from the reward mechanism of a placed order, which can be refunded. From a theoretical economic point of view, gratuities may solve the principal–agent problem (the situation in which an agent, such as a server, is working for a principal, such as a restaurant owner or manager) and many managers believe that tips provide incentive for greater worker effort. However, studies of the practice in America suggest that tipping is often discriminatory or arbitrary: workers receive different levels of gratuity based on factors such as age, sex, race, hair color and even breast size, and the size of the gratuity is found to be only tenuously related to the quality of service.
Etymology and history.
According to the "Oxford English Dictionary", the word "tip" originated as a slang term and its etymology is unclear. According to the "Online Etymology Dictionary", the meaning "give a small present of money" began around 1600, and the meaning "give a gratuity to" is first attested in 1706. The noun in this sense is from 1755. The term in the sense of "to give a gratuity" first appeared in the 18th century. It derived from an earlier sense of "tip", meaning "to give; to hand, pass", which originated in the thieves' cant in the 17th century. This sense may have derived from the 16th-century "tip" meaning "to strike or hit smartly but lightly" (which may have derived from the Low German "tippen", "to tap"), but this derivation is "very uncertain". The word "tip" was first used as a verb in 1707 in George Farquhar's play "The Beaux' Stratagem". Farquhar used the term after it had been "used in criminal circles as a word meant to imply the unnecessary and gratuitous gifting of something somewhat taboo, like a joke, or a sure bet, or illicit money exchanges."
The etymology for the synonym for tipping, "gratuity", dates back either to the 1520s, from "graciousness", from the French "gratuité" (14th century) or directly from Medieval Latin "gratuitas", "free gift", probably from earlier Latin "gratuitus", "free, freely given". The meaning "money given for favor or services" is first attested in the 1530s. In some languages, the term translates to "drink money" or similar: for example "pourboire" in French, "Trinkgeld" in German, "drikkepenge" in Danish, "drinksilver" in Middle Scots, and "napiwek" in Polish. This comes from a custom of inviting a servant to drink a glass in honour of the guest, and paying for it, in order for the guests to show generosity among each other. The term "bibalia" in Latin was recorded in 1372.
The practice of tipping began in Tudor England. In medieval times, tipping was a master-serf custom wherein a servant would receive extra money for having performed superbly well. By the 17th century, it was expected that overnight guests to private homes would provide sums of money, known as vails, to the host's servants. Soon afterwards, customers began tipping in London coffeehouses and other commercial establishments".
The practice was imported from Europe to America in the 1850s and 1860s by Americans who wanted to seem aristocratic. However, until the early 20th century, Americans viewed tipping as inconsistent with the values of an egalitarian, democratic society, as the origins of tipping were premised upon noblesse oblige, which promoted tipping as a means to establish social status to inferiors. Six American states passed laws that made tipping illegal. Enforcement of anti-tipping laws was problematic. The earliest of these laws was passed in 1909 (Washington), and the last of these laws was repealed in 1926 (Mississippi). Some have argued that "The original workers that were not paid anything by their employers were newly freed slaves" and that "This whole concept of not paying them anything and letting them live on tips carried over from slavery." The anti-tipping movement spread to Europe with the support of the labour movement, which led to the eventual abolition of customary tipping in most European countries.
Also, proprietors regarded tips as equivalent to bribing an employee to do something that was otherwise forbidden, such as tipping a waiter to get an extra large portion of food. However, the introduction of Prohibition in the US in 1919 had an enormous impact on hotels and restaurants, who lost the revenue of selling alcoholic beverages. The resulting financial pressure caused proprietors to welcome tips, as a way of supplementing employee wages. Contrary to popular belief, tipping did not arise because of servers' low wages, because the occupation of waiter (server) was fairly well paid in the era when tipping became institutionalized.
Reasons for tipping.
Tipping researcher Michael Lynn identifies five motivations for tipping:
A 2009 academic paper by Steven Holland calls tipping "an effective mechanism for risk sharing and welfare improvement" which reduces the risk faced by a service customer, because the customer can decide whether or not to tip. Tipping is sometimes given as an example of the principal–agent problem in economics. One example is a restaurant owner who engages servers to act as agents on his behalf. In some cases, "[c]ompensation agreements [can] increase worker effort [...] if compensation is [...] tied to the firm's success" and one example of such a compensation agreement is waiters and waitresses who are paid tips. Studies show however that, in the real world, the size of the tip is only weakly correlated with the quality of the service and other effects dominate.
Tronc.
A tronc is an arrangement for the pooling and distribution to employees of tips, gratuities and/or service charges in the hotel and catering trade. The person who distributes monies from the tronc is known as the troncmaster. Where a tronc exists in the UK, responsibility for deducting pay-as-you-earn taxes from the distribution may lie with the troncmaster rather than the employer. The word "tronc" has its origins in the French for collecting box. In June 2008, the Employment Appeals Tribunal ruled in a UK test case (Revenue and Customs Commissioners v Annabel’s (Berkeley Square) Ltd) that income from a tronc cannot be counted when assessing whether a wage or salary meets the national minimum wage.
Mandatory tipping.
Tipping may not be expected when a fee is explicitly charged for the service. A service charge is sometimes added to bills in restaurants and similar establishments. Attempts to hide service charge by obscuring the line on the receipt have been reported. A service charge, or fee assessed, is determined by and paid directly to the company. The charges may be for services rendered, administrative fees, or processing cost.
In the United States, criminal charges were dropped in two separate cases over non-payment of mandatory gratuities. Courts ruled that automatic does not mean mandatory. Some cruise lines charge their patrons US$10 per day in mandatory tipping; this does not include extra gratuities for alcoholic beverages.
By region.
Africa.
Nigeria.
In Nigeria, tipping is common at upscale hotels and restaurants but a service charge is usually included in the bill, though the employees rarely get this as part of their wages.
Madagascar.
In Madagascar, tipping is not expected.
Morocco.
In Morocco, tipping is not mandatory, but rounding up the bill and leaving tips at restaurants and cafés, or to the service providers is a standard practice and appreciated.
Asia.
Azerbaijan.
Tipping in Azerbaijan is mostly observed in services such as taxi as well as restaurants. Total size of the tip is also based off the overall cost of the said service. Restaurants often do not charge tipping in the receipt, however, it is still considered a necessity by many to tip the waiter for their work. Additionally, gratuity is widely acceptable in parking. Unlike valet parking, tip is usually customary when a person helps you park, or guides you to a suitable parking space.
China.
In China, traditionally there is no tipping. However, hotels that routinely serve foreign tourists allow tipping, as do tour guides and associated drivers.
In cities bordering Hong Kong like Shenzhen, some restaurants and hotels also started to charge gratuity since the 1980s.
Hong Kong.
In Hong Kong, tipping is not typically expected at hotels or restaurant establishments, where a "service charge" of 10% is added to a bill instead of expecting a gratuity. Taxi drivers in Hong Kong may also charge the difference between a fare and a round sum as a "courtesy fee" to avoid making change for larger bills.
Japan.
As a service charge is typically included as part of bills at hotels and restaurants, tipping is generally not practiced in Japan. In addition, Japan has a set of traditions and customs regarding giving money as a gift, so tipping may cause confusion or be considered rude if the money is given without being placed in a special gift envelope first. Like many other countries in East Asia, Japanese people see tipping as insulting. The Tip Project, a plan to normalise tipping in Japan in 2021, was met with severe backlash from locals who deemed the practice "un-Japanese", and the project was abandoned in early 2023.
India.
In India, tipping is not normal in hotels and restaurants, but may be appreciated. Tips can be rounding off the bill or 5%-10% of the bill. However, it is gaining popularity and the food delivery apps often nudge the customers to tip the delivery partners.
Iran.
Tipping is not expected for occupations mostly.
Malaysia.
In Malaysia, tipping is not the norm and is not expected for any service. Instead restaurants can add a service charge of 10% to the bill. In Malaysia the people are familiar with tipping, so if a person does leave a tip then it is accepted and appreciated. Tips, when given, usually take the form of rounding up the bill.
Pakistan.
Tipping is not an obligation, and it is not considered rude not to tip, though workers will be pleased if tipped. Normally in low to medium-end restaurants, the bill is rounded up to the nearest Rs.100 or 1000 and the change is given as tip either directly to the waiter or left on the table.
In more formal settings, hotels and restaurants add a 10% service charge to the bill, which is paid along with the bill itself.
Philippines.
Tipping is not customary in most areas and is not generally expected.
In upscale restaurants, if a service charge is added, tipping is not needed nor expected. Among smaller side street restaurants, service charge is usually not included and tip amount may vary from loose changes to not at all (most do not give tips). The customer in this case can give any amount he/she wishes.
Fastfood areas (McDonald's, Jollibee, Popeyes, etc.) are not tipping locations and staffs are reluctant to accept money.
Hotels bellboys are generally provided tips but amount is not fixed and may depend on the customer. Taxis are not provided tips but customer may pay extra to avoid loose change (usual range of 10 to 30 pesos). App based vehicles (Grab etc.) are usually paid tips via app and therefore under the discretion of the customer.
There are establishments that strictly implement a "No tipping policy".
There are establishments that can accept tips but must be placed in designated tipping containers.
South Korea.
Tipping is not customary in Korean culture, and tipping is not expected in the general service industry. Some people even regard tipping as an inappropriate behaviour. High-end hotels and restaurants often include a service charge of between 10% and 15%, but it is always included in the