Tipping: Subsidizing corporate greed

Gigantic rant follows. Ye have been warned.

Okay, so as some of you already know, I delivered pizzas for a living and still do when I’m not doing other things. And for those who make a decent living from tips, good for you. But not everyone does, and it opens the door for really stupid crap.

I could get into the whole spiel about how much it sucks when you earn tips for a living and the asshole on the customer side of things doesn’t agree with the whole tipping concept. But that’s not even the main issue.

Here’s the main beef with tipping- the hidden costs.

Let’s use my business as an example. If you order a large pizza, and you elect to come pick it up when we’re finished making it, it’s 10 bucks plus tax. That ten dollars pays for the food to be delivered to the store, stored, cooled, frozen, prepped, portioned, assembled, baked, cut, boxed, sealed, bagged, and ready for you to eat. And every person along the way from the truck driver who delivered it, to the people cooking and assembling it, all got paid a fair wage along the way.

Now, say you want it delivered. Oh, that’s fine, the pizza is still ten dollars, except… there’s something called a “delivery fee”.

What’s the fee used for? Ostensibly, to pay the delivery driver for his mandatory gasoline expenses. It just barely covers this, because (did you know?) the entire delivery fee does not go to the driver. Only the portion allotted for the gasoline. Who keeps the rest? Why, the business charging you the fee, of course. So let’s say the driver sees between 30 cents and a dollar of that fee (which is the most recent structure, having been changed within the past month) where does the other two dollars go?

Well, if we look at things from an expenses point of view, there’s an extra set of hands handling your food. So, that’s an added expense.

Except the driver’s making 4 bucks an hour, since this is supposedly a “tipping” profession. And the driver is making more than two deliveries an hour (or else he sucks at this job).

So, the expense of having the driver at all is offset… completely… and THENSOME… by the delivery fee alone. The driver gets out of this deal, his gasoline expenses paid for, and half a living wage.

From where comes the money to pay for his $200 a month in automotive insurance? That’s over a week’s worth of wages. So he works the first week and a half of his job every month for free, just for the privilege of having a portion of the risks associated with driving for a living covered by an insurance carrier. Almost a third of his monthly wage is gone right off the bat. Now factor in the depreciation, wear and tear, additional maintenance, tires, oil, and idiots scratching/slamming your car doors while you’re parked, and you easily see half your monthly wage (what you see on your paycheck) completely bleedin’ gone before you even get started with your actual living expenses. And of course, keep in mind your monthly wage is half of an actual living wage as it stands.

So that’s an expense of at least 300-400 dollars a month sunk costs associated with the business. Is that compensated for? No, because it comes out of the worker’s pay. It’s not added on, like the gasoline expense is.

Why doesn’t that entire delivery fee go to the worker? Answer: Because why pay the workers a fair form of compensation when you can say look, they’re paid half a wage, plus gas, plus tips. They make their money.

Ah, but where does the rest of the money come from?

Let’s look at the tipping aspect. So after expenses, the worker is earning a good 400 dollars a month, if he’s lucky and gets enough hours. His gasoline and car expenses are now paid for, and he can begin paying his actual personal expenses.

So, before we even pay any rent, we’re already in the red.

Where does the rest of the money come from? Well, supposedly there’s tips involved, yes? Okay. Let’s examine this.

What you just paid:

$10 for the pizza.
$3 for the gasoline, “delivery fee”… only a dollar of that (if that) going to actual gasoline/helping the driver in any way.
$1.50 or more in Taxes. Some of those taxes go for things like food stamps, to help this impoverished worker eat. How about other forms of public assistance to help needy families? These come from your taxes. And these people with actual jobs wouldn’t need any public assistance if the employer actually paid a livable wage.
Let’s pretend we’re tipping as well. Let’s say we give the man a two dollar tip.
$2 tip. Next customer tips nothing. Thats an average of 1 dollar per delivery tips.

What the driver sees:

$4.80 or whatever in wages, per hour.
$1 per delivery on average, times 3-4 deliveries an hour.
$1 or less for gasoline, which evens out the gasoline expense. Just ignore this figure.
$400 a month in expenses related to the job itself. So, negative $400 a month.

Meanwhile, the company just made $12 in delivery fees.

So, the company just paid the driver’s ENTIRE WAGE, and ALL his gasoline expenses.

The driver actually costs the company… NOTHING. And thensome. The driver has now made the company money, because he’s only costing them 8 dollars an hour TOTAL, and he just earned them 12 dollars in delivery fees.

And, because there’s this huge ass delivery fee, *many customers are under the mistaken impression that the tip is included, *and the driver is prohibited from saying jack squat about that at the door. Unless you ask them directly.

And why wouldn’t the tip be included?

Why wouldn’t the worker’s $8 in costs simply be something the company eats, for the privilege of having another $100-$200 worth of delivered food revenue that hour, per worker?

Why wouldn’t the driver see that entire $3 delivery fee? Remember, it’s costing him $400 a month just to operate the friggin delivery vehicle. He’s in the hole for a week and a half before he sees his first dollar, every month.

That would be fair and equitable. Sure, the driver doesn’t make jack if he’s not delivering, he’s only getting half a wage. But when business is good, he’s earning three dollars a delivery. Which means it’s in his best interest to deliver fast and with great service, so he can earn more. And since you’re charging the customers that money to begin with, ostensibly for the “cost” of doing deliveries, why wouldn’t 100 percent of that money end up in the hands of the actual driver?

Then it really wouldn’t matter if customers tipped or not. And many of these drivers wouldn’t need food stamps or other forms of public assistance.

If the point of all this isn’t clear yet, you can be forgiven, but here it goes.

Why is it legal to pay this person less than minimum wage? It costs this person two weeks worth of wages, at 40 hours a week, every month, just to pay legally mandated taxes, regulatory fees, and insurance. These aren’t optional costs. That means their actual take home pay, from their paycheck that they earned from their legal “employer”, is actually less than 384 dollars.

That’s what this person is actually getting paid by their employer. It’s not even close to paying rent, let alone any actual bills. Because none of these other expenses related to the job are being compensated for, yet they’re charging the customer three dollars, and explaining this fee as a way of paying for the cost of delivering. But this isn’t the case.

The actual cost of delivering, must be, from your tip. Because we are all painfully aware, less than 400 dollars is absolutely impossible to live on. And of course, whatever the government helps with in terms of food stamps, subsidized housing, socialized medicine (what little there is) and so forth, that money that they could be, let’s say, earning from their actual employer, they’re not getting from their employer. They’re getting that money through public assistance programs, meaning taxes.

So, 2 bucks tip, 2 bucks in taxes, and 3 dollars in fees, only a dollar of which goes to the driver, and the company is actually EARNING 4 dollars an hour profit from the driver actually being there, snagging 12 dollars an hour in delivery fees for the company.



WHY IS THE WORKER GETTING THE GRAND MAJORITY OF HIS ACTUAL COMPENSATION FROM TAXES AND GRATUITIES AND ADDITIONAL FEES FROM THE CUSTOMER, not from, let’s say, the profits from the 10 dollars per pizza he’s delivering? Or more if you like more than one topping?
At the end of the day, YOU the CONSUMER are paying the delivery driver $2 tip, $1 in gasoline, and an additional $2 towards his half-wage, as part of the delivery fee, and then of course, additional funds from state and federal taxes to subsidize these people’s food, housing, and medical care, none of which are actually covered by his actual wages?

So, the actual cost you’re paying per delivery is now upwards of 6 or 7 dollars, and the company that employs this driver is earning more from the driver’s delivery fees than they actually pay the driver, wages and driver reimbursement inclusive.

The company ends up making $4 an hour, instead of paying this driver a livable wage or covering his expenses properly, and it’s costing you the consumer an additional 6 dollars.

Meanwhile, the driver is living a pretty bottom of the barrel life. He’s relying on charity and government assistance to get by. But you are paying a premium for his services and he’s barely seeing any of it. And the company which doesn’t have to pay this employee any healthcare costs, or most of his job-related costs, or even enough to cover his frickin’ rent, gets to saddle you the consumer, and you the taxpayer, with almost all of the costs.


Why wouldn’t the solution be obvious? The solution is you pay the driver a living wage and cover his expenses. Why isn’t it legally mandatory to pay the driver minimum wage? Why is it legal to only give the driver a portion of the delivery fee?

If the “employee” gets most of his actual compensation from the government, from taxes, from already-included additional fees (which are, essentially, taxes, just not collected by the government) and from gratuities, then why is his “employer” even called his employer?

Why does his employer profit from the driver, while paying the driver almost nothing, and shafting the consumer?

The answer is because it’s legal. Because tipping is a thing (for some people not everyone) and that means some bureaucrat who never worked a day in his life decided that since you earn tips, you don’t have to earn a living wage. And now, the businesses that earn a billion dollars a year can “employ” tens of thousands of people AT NO COST TO THEM, but definitely, a cost added to the consumer.

Why shouldn’t businesses be forced to cover more of the costs?

Oh, but Askthepizzaguy, you have no idea how the business world works. If you pay the drivers properly, the business won’t survive!

ORLY? Do you know what percentage of the day’s income goes back out in “labor”?

Because I do. I’m not just a driver. I’m also a manager.
It varies by location, but we can easily do 14%.

That’s 14 percent for the entire staff.

Since the delivery staff is earning half the wage a normal staff person would, and the entire staff is not delivery drivers, you can assume the portion of the “labor” which is spent on drivers is around… 5 percent. Or less.

Now, if you double that, it means labor goes up to 19%.

How could a business survive with an additional cost of 5 percent?!?!?!
Answer: That 10 dollar pizza is now $10.50.

Ten dollars and fifty cents.
Ten dollars and FIFTY CENTS.
That’s how much it SHOULD COST YOU to pay the driver properly. It should cost you 50 cents per pizza.

And how on earth would pizza chains manage to do this?

That’s just not possible, Pizzaguy. You have no idea how the real world works. You have no idea about how businesses work. You’re a socialist commie, pizzaman.

How could a for-profit enterprise possibly pay their delivery drivers minimum wage?
They used to pay the drivers minimum wage! About seven years ago. They stopped doing this because someone decided that minimum wage was too good for the average worker, and adopted the legal loophole of “you earn tips, you don’t get to earn a wage.”

And may I remind you, the company in question EARNS 12 dollars per hour, just from the delivery fees alone, per driver, and pays out about 8 dollars total expenditure. Thats 4 dollars per hour NEGATIVE labor cost.

Negative labor cost!


So don’t tell me they can’t afford to pay their workers more.

They don’t because YOUR elected representatives made it legal for them to not do so, and to turn around…

In taxes and fees and “gratuity”.

You pay for the worker, and the worker ends up paying to the company more than the company pays to the worker.

How is that at all a fair, balanced, or equitable system?

Your 10 dollar pizza just went up to 15 or 16 dollars, and the company that “employs” the driver just earned a dollar. They could have cut a dollar off of the delivery fee and still** made the same profit** they do from if you picked it up your damned self.
So thus, the true problem with tipping lay exposed: Not only is it an egregiously unfair system wherein work is exchanged for the possibility of payment (or the possibility of nonpayment) rather than a legally mandated MINIMUM wage, but it also adds an enormous 5 or 6 dollar expense DIRECTLY to the consumer, which should have only, realistically, cost them 50 cents more.
And when Papa John’s guy makes asinine statements about how he’s “gonna have to cut workers hours” just to cover the added expenses of, you know, being forced to cover employee’s healthcare costs instead of letting them ride the “Emergency Room visit with no ability to pay” plan, which is their default plan, you know he’s full of shit.

And so is every other one of the big three companies. They’re full of shit!

They’re charging you in delivery fees SIX TIMES what it should actually cost the consumer, per pizza, what it would cost to properly give a wage to the actual worker, while only paying that worker half a wage, and less than half his job-related expenses.

And then you have to pay a gratuity on top of all that just to make sure the guy can, you know, EAT.

That’s the bullshittingest bullshit of all bullshit.

Yep, in some ritzy neighborhoods, some delivery drivers are earning decent money off of just tips. In others, there needs to be an actual living wage, and it should be legally required.

Legally mandated minimum wage to all workers, everywhere, without exception, NOW.

That’s just for starters. Pay the driver for all his work-related expenses on top of that, and then get rid of that ASININE delivery fee.

It’s not the tip. It is SO not the tip.


Didn’t you know? The minimum wage itself is an evil that stifles the free market. Better to just eliminate it entirely, so our holy Job Creators can bring us all a trickle-down utopia. After all, mistreated workers would cause customers to go elsewhere, so it’s all self-correcting.

Seriously, though, it has absolutely nothing to do with what the businesses “can afford.” Any attempt to make them pay a penny more than they are required to (legally or morally) is seen by way too many people as an affront to basic precepts of liberty and economics. You’ll have to overcome THAT to make any headway. I mean, it’s enough of a struggle to get the minimum wage we have raised a buck and hour.

Who is “them”? Companies are owned by people. It’s “us”.
And *making *“us” pay more for something is actually an affront to liberty, as you describe it.

Your employer may have paid drivers minimum wage until seven years ago.But there’s been a lower minimum wage for tipped employees for much longer - at least as far back as 1980. And although you (or delivery drivers in general) may not like it, a lot of tipped employees don’t want it to change. Just read any thread about tipping , and you’ll see people talking about how they make more with tips than they would with a higher wage and no tips , how their taxes are lower because they don’t report their tips , how the service would be worse if they got the same pay for good service or bad, etc. Then you’ve got customers who prefer a tipping system so that they can directly reward good service and pay less for poor service and others who prefer it because they don’t tip and therefore don’t want prices to go up because of the higher wage. Employers probably care least of all, because if they have to raise prices due to a higher minimum wage, so will all of their competitors. In fact, it’s very likely that the reason your company switched seven years ago was that one of their competitors switched - either that, or your company was the first and the competitors followed.

Moved MPSIMS --> GD.

I don’t order pizza for delivery these days in large part because my $11 pizza suddenly turns into a $16+ dollar pizza with the “delivery fee” plus tip added.

I think the whole idea of paying less than minimum wage to “tipping professions” is bullshit. What I choose to tip or not tip is a decision I make based on the service the server gives me. At no point should I as the customer be directly responsible for paying part of the server’s salary. That is the responsibility of the employer.

I won’t disagree with the OP that being a pizza delivery driver is a shitty low paying job, but I should point out that the employer’s costs are higher than just the $4/hour they pay. Employers also pay their share of FICA taxes as well as make payments into the unemployment fund, that’s not to say their costs are very high, but it is a little different than your math represents.

It needs to be pointed out that technically, there is no lower minimum wage for tipped employees. It’s just that employers are allowed to credit tips made against the minimum wage to a certain point–that point being the so-called lower minimum. If a driver (or server for that matter) is bringing home less than minimum wage that means the employer is illegally claiming a bigger tip credit than he is entitled to.

I had a colleague in Vegas who did pretty well delivering pizza … he was a Bass player, but he only performed about two nights a week. He carried pizza Sun through Thurs. So, we’ve talked about this subject at length.

Seems to me that there are three angles to play here: One, the customers stop doing business with the lousy paying store; Two, the drivers refuse to work for the paltry wages; Three, the Government forces the business to pay higher wages.

I can’t see any other factors affecting the equation. Which is most likely to happen? If it’s decent pizza, the customers aren’t likely to boycott unless something dastardly about the business comes out in the media … and then, that’s one less place for the current drivers(and cooks, etc) to work.

The drivers could picket the store and get media attention to the issue, but I’m afraid they’d get fired. Same result for them … looking for another job.

The Government is taking heat over ObamaCare, and Papa John’s is one of the businesses at the heart of that debate, right? I guess we have to ask ourselves if an advocacy group could lobby the Government for a higher minimum wage for delivery workers.

It doesn’t make sense to me to lump servers at a steak house, or cocktail waitresses/ bartenders at a lounge in with delivery staff, for the simple reason that the service in a nice restaurant is part of the meal experience … the waitstaff are performing, to a degree, and are the “face” of the restaurant to the customer, often for an hour or more, back and forth with various demands. I gather once the pizza is in the consumer’s hands and you’ve been paid, you’re off, what about two minutes?

So including restaurant food and beverage servers in the debate is apples and oranges … and that tells me that there should be separate laws for delivery staff … they’re not just tip earners, they are their own class of tip earner.

Maybe the best tack is to press for a “delivery tip-earner” minimum wage.

That’s it, right there. Bravo.

Just a few random thoughts…

First, I’ve never experienced a “delivery fee” for pizza. I guess in my area (northern NJ), there is enough competition that most pizzerias either deliver free or not at all.

Second, I’ve made it a point to tip fairly well when I have a pizza delivered, generally on the order of 20% of the check. Pretty much the same as I tip the waitperson in a restaurant,

Third, there is competition in the labor market as well. The reason pizzerias can get away with paying their delivery drivers this way is that there are people willing to do the work for that amount of money. If they are living on government entitlements, that’s a severe problem, but I don’t think legislation of a higher minimum wage is the answer. The entitlements themselves may be the problem, since if they were not available, pizzeria drivers would need to either be paid a living wage or else find other employment where they could make a living. If they did the latter, then pizzerias would be left without available drivers, meaning that they would be forced to increase their wage to attract workers. It’s the fact that these government benefits are available that actually allows the employers to operate the way you describe.

Finally, I did a double-take on the percentage of revenue you attribute to payroll. 14%? Really? Admittedly, I’ve never worked in the restaurant industry (except for a 3-week stint as a flunky at Burger King in 1971, better left unmentioned), but in every business I’ve been involved with where I was privy to the P&L, the payroll usually constituted something in the area of 40-50% of revenue. 14% makes me wonder where the rest of the money is going. Surely flour and tomato sauce aren’t *that *expensive?

To be honest, and no offence to you, I don’t care in the slightest what the internal costs are for making and delivering a pizza.

All I want to see are two prices.
A) for a pizza I collect myself
B) for a pizza to be delivered.

The rest is utterly irrelevant to me as a consumer. It is up to the business owner to manage costs in whatever way they see fit.

The fact that you managed to have such a long rant about the subject is evidence to me of the ludicrous nature of tipping.

What does it cost to provide a product or service? add a bit on for profit and charge me that, If I don’t like it I can look elsewhere, everyone is happy.

I was pretty much thinking the same thing.

1 - Companies hire new employees because they expect each new hire to bring in more revenue per hour than one less employee. So OF COURSE the company is making more money by hiring a driver.
2 - Assuming that you aren’t off the books, you are certainly costing the owner significantly more (as a percentage) than $8/hour.
3 - Assuming your employer does his best to keep delivery drivers to a minimum during slack times, he most likely will still have one or two drivers always available, even when not making 4 deliveries an hour. Lower your projections even more.

Note that I am neither defending nor decrying tipping. I got tired or rehashing the pros and cons within one month of joining the board. Let others who never tire of posting the same arguments ad nauseum rant and rave.

Your analysis is also potentially fatally flawed because you assume the company pricing for the pizza picked up at the store MUST involve all costs and a profit, and hence everything over and above is strictly for delivery alone. This does not need to be true. The store sales could be a loss leader to encourage people to try the pizza, and the profit is being made up by customers to whom the pizza is delivered.

Prices reflect what the market will bear. What the delivered pizza “should” cost the consumer is what the consumer is willing to pay for the pizza and the convenience of having it delivered. You seem to be assuming that the price of a delivered pizza should be cost of pizza + cost of delivery, rather than whatever consumer will pay for pizza + whatever consumer will pay for delivery.

In every similar industry I’m familiar with, the workers are, indeed, guaranteed the same minimum wage as every other worker. That is, if wage + tips comes to less than the minimum wage (presently $7.25/hour, though some states are higher), the employer must make up the difference. Is that not the case with pizza delivery?

Askthepizzaguy how do you rationalize working as a manager for this evil business? Are you there to instill changes in how they operate? Or do you work for one of the better evil businesses?

US tipping culture is a bit crazy.

Customers agonising about how much to tip serving staff. It came as a bit of a cultural shock when I first visited the US from the UK. No-one tells you that it is because so many people in the service business are underpaid or barely paid at all. Where is the sense in that? Maybe people like to reward very attentive service in expensive restaurants, but what about ordinary diners or indeed pizza delivery? These regular jobs with very a much smaller service element should pay a living wage rather than being subsidised by irregular and insubstatial tips.

In the UK we had this argument about employers cannabalising the tips. There was a campaign by a couple of big national newspapers and a large labour union. We eventually got a law. Reading through it, it tries to anticipate various arrangements for collecting tips and how they are to be distributed, with the intention of ensuring they are taxed at the right point. It all seems a bit complicated and a learnt a new word ‘troncmaster’ - someone who distributes tips.

I shall ask in my local restaurants how it works in practice.

The UK also has a national minimum wage, which is $9.60 at the moment. Most people are paid more than that and it is pretty universal. We had some argument from the free marketeers on the principle it was bad for business, but it is pretty much accepted now. A bit like the smoking ban.

One thing I noticed on my visits to the US is that though the customer is expected to tip, if there is anything wrong with the service customers are quick to complain and managers do sack employees for poor service.

Complain over here in the UK and the manager will look down the nose at the customer and someone who is insulting his business and taking issue over very minor issues. You might get thrown out as a vexatious troublemaker some character like Chef Gordon Ramsey.

It is so slanted towards the employees that I was once told by an waitress, when I interrupted her conversation, that she was ‘not in the business of pandering to customers’. I think I was expected to apologise for disturbing her social life. Serving is a low paid job and consequently has low status.

On the other hand, I met a waitress who, after a quiet evening in the restaurant took a taxi home, only to have an argument with the taxi driver who seemed to think he was entitled to a tip despite the fact that he earned far more than her.

This is crazy. The reasons for this in the UK are to do with historic class conflicts that do not exist in other countries. These sort of attitudes mean that if you want decent service in the UK, you go to a restaurant where the service is provided by the nationals of countries where there is a decent service culture. Italians or French are usually good. But if there was a place staffed by Americans, that would be quite something (though the customers would need to be advised about tipping appropriately.)

While tipping and ‘service’ are inevitably bound up with social and cultural customs, the underlying principle that someone should get a fair wage for the hours of work they put in seems wholly reasonable.

I would not be able to enjoy my food if I thought the person serving or delivering was scammed out of their wages by sharp practice concerning tips on the part of their employer.

If the delivery aspect of the business is so profitable, it sounds like you could do what Kosmo.com failed to do. Make money by delivering stuff by ordering stuff for pick-up and delivering for the same fee (Kosmo also delivered anything else including cigarettes, beer and videos).

Yeah, I don’t think anyone pays attention to that.

Well, you can get around that guilt by tipping generously. It makes the food taste better.

The money comes from the customer. That’s all there really is to it. The employer doesn’t pay the employee’s wages, you do. The boss just distributes funds, to overhead, to taxes, to the employees. All of these funds come from the customer.
That’s why I don’t get the stress over tips and wages. The server or delivery boy gets “X” amount per week. It can come from the customer through the employer in one of two ways: One, the employer gives the worker about 70 or 80% of his earnings and the consumer gives up 20 or 30%. The other way is the employer takes the money you spend on his food and gives the entire “X” amount to the employee. It’s gonna be about the same amount, the only difference is, does the employer handle all of it before the worker gets it or does the customer give 20% to the worker directly?