Why do we tip people?

When I was in the Bahamas years ago, tipping wasn’t required. You were hit with a 15% automatic surcharge they called the tip.

There are two obvious problems with this. First, there’s no way to be sure the 15% is going to the server.

Second, the service sucked rocks through a hose. Really, really, really awful. Waiters/waitresses were slow and would not do anything other than take your order and (eventually) bring your food. Good luck finding someone if you had a problem.

There was one restaurant during our stay that allowed tipping. Not coincidentally, it had good service.

But the answer to the OP is quite simple: Why do we tip? To Insure Promptness, of course. :slight_smile:

I certainly have.

You see, not only are tips reported income (as has been noted), the IRS has an expectation of that income, and it’s not necessarily entirely on the waiter/waitress to be honest.

My SIL used to work as a waitress at a lower-end chain restaurant, back when she was a college student. The restaurant reported the sales per table and their assigned staff directly to the IRS, and income tax on an assumed average 15% tip rate was automatically deducted from their paychecks.

This restaurant was near her college and a large percent of the clientele were students and local teenagers who were there to eat cheap. There were nights where she’d have large tables running up a big bill who seriously undertipped (less than 15%) or even stiffed her completely. She particularly detested the parties of 12 or so kids who’d come in around 9pm. Often most of them would order just an ice cream sundae or an appetizer, then would sit there for an hour and a half eating and talking before paying exactly what the bill read, rounded up to a round dollar amount if she was lucky. Sometimes they’d even leave exactly, to the penny, the bill amount.

All the same she was still auto-taxed at 15%, meaning she ended up paying tax on non-existent income because it wasn’t documented. (At least if they ran out on the bill completely, as also happened a few times every week, she wouldn’t get taxed for it, but she would have wasted the time and table space.)

She’d MUCH rather have had 15% service charge built into the menu pricing.

So, if you work at a place where bills/tips are paid in cash and the average tipping rate is better than 15%, you have the opportunity to get to pocket that excess as tax-free income. But conversely, if you work at an establishment frequented by deadbeats and cheapskates, you can get seriously shafted.

If it’s a bribe, it should be illegal then, right?

No. Why would it be illegal? Only prohibited bribes are illegal. If you are at a supper club, and you go up to the band leader, hand him/her and say “play ‘I Write the Songs’ for me”, that’s a bribe. But it isn’t at all illegal. In poor taste, surely, but not illegal.

I very much doubt this. My Bro worked on this sort of thing in the iRS, and that sort of restaurant is set at 8%, unless the IRS has specifically audited the tips at that very restaurant and come up with a higher amount. (or a lower amount). He personally “audited” the tips at a couple of Coffee shop chain restaurants and came up with a rate of around 8%.

"*What are allocated tips? These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Your employer will have done this only if:
You worked in a restaurant, cocktail lounge, or similar business that must allocate tips to employees,

The tips you reported to your employer were less than your share of 8% of food and drink sales, and

You did not participate in your employer’s Attributed Tip Income Program (ATIP).
How were your allocated tips figured? The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees’ sales or hours worked. For information about the exact allocation method used, ask your employer.

Must you report your allocated tips on your tax return? You must report allocated tips on your tax return unless either of the following exceptions applies.
You kept a daily tip record, or other evidence that is as credible and as reliable as a daily tip record, as required under rules explained earlier.

Your tip record is incomplete, but it shows that your actual tips were more than the tips you reported to your employer plus the allocated tips.

If either exception applies, report your actual tips on your return. Do not report the allocated tips. See What tips to report under Reporting Tips on Your Tax Return, earlier. "*
Note that having an allocated rate of higher than 8% is extremely, very rare, only at the very highest end of restaurants, where waitstaff often bring in $500 on a good night.
Next, even the 8% is assumed, and a timely kept log (by the waiter) will over-rule it.

Other than the low end coffee shop restaurants, mostly waitstaff in America like tips. At the one end, the “tip jar” and the very rare not expected tip (like at a sandwich shop with counter service), the money is pretty well free, and no taxes are reported (they should be, but honestly, not even the IRS really cares, unless it gets into real money). So, these dudes earn real minimum wage, plus a little extra. (In those kinds of jobs, the company can not pay them lower than minimum wage, since tips are not expected to make it back).

At the other, the premium restaurant, with linen tableclothes and superb service, a top waiter can make a very very good rate of pay, far more than he’d ever earn by the hour. If he’s careful and not greedy, a decent % of his cash tips will be tax-free, too. Mind you, all his CC tips and an assumed rate will be taxed, he’s certainly paying taxes on a lot of it.

Yes, a waitress in Dennys isn’t making all the great a living, likely only a tad more than she’d earn by hourly wages. And the work is hard, the tips are not even. It’s a tough job. Please remember this, and give her a decent tip 15% even if maybe things aren’t perfect.

But you can work your way up. Top waitstaff are in high demand, and are often sniped by other restuarents. They do not need any sympathy, many are earning more that we are.

I spent the longest 24 hours of my life at Freeport, Bahamas. The restaurant we had dinner in added the 15%. From the time we put in our order to the time the food arrived was an hour, with the waiter making no intermediate appearance whatsoever. After we were served it was another hour before I finally had to ask the manager for the check. I complained about the service charge. He took it off and sent us out the door with two cocktails to go. :smiley:

No, that’s a direct payment for a service. A bribe is a payment that is morally questionable or illegal.

In fact, some high-end and very popular mid-level restaurants around here will scout for servers.
My daughter was hired away from a Carrow’s by a local cafe owner. Her income went up considerably.
I’ve heard, but don’t know for sure, that the head server at the world famous Chez Panisse (yum) here in Berkeley used to do the same.

Yes, thank you, an excellent point.:cool:

From a New Yorker article, that I’ve quoted several times on this board, but I don’t know of any other studies on tipping:

I really hate to quote m-w, but here goes:

Bands often have playlists, often approved by management, that they generally stick to. Giving the leader a twenty to assault everyone’s ears fits #2. :slight_smile:

Some of my freinds go to Australia and NZ a couple times a year. A few things- at high end restaurants, tipping is fairly customary in Australia. Not like the US, of course. But they said they got horrible service just about anywhere anytime in NZ. They agreed that at a coffee shop to mid-level restaurant in Australia, tipping (other than perhaps the change from your bills) was not expected and the service was just fine.

And from your cite "Diners—eighty per cent of whom say that they prefer tipping to a set service charge—like the power that the ability to tip gives them. Waiters like tipping because it gives them the chance to distinguish themselves from the crowd and to score an occasional windfall.

I don’t know how to quote a quote, but that’s not important.
I think that study is, in general, quite correct. But in a restaurant that has a lot of return customers, consistent 20% tips will get you more attention from the staff. Things like making sure your eggs are right, and getting your food a little more quickly from under the lights to your table. They remember you, and talk about you. :stuck_out_tongue:

Well that’s 20 years too late for me to tell my SIL. Even so, that’s from the IRS perspective – not the employer’s or the employee’s.

A Google search shows she’s not alone in her experience. Check out this thread on a discussion board.

Sample replies:

“I’m not in foodservice anymore but when I was still working, our servers were taxed on the assumption that they got 15% of their sales in tips.”

"Many restaurants figure 15% of your total receipts and deduct it from your pay check. If you don’t get a tip or just get a small tip, you pay taxes on money you did not earn. It does not matter whether it is cash or credit card or debit card. They go by receipts from your tables. "

Further down someone corroborates what your brother says from the IRS perspective:

"Tips are taxable income in the U.S. and have been at least since I filled out my first tax return in the 70s. It doesn’t matter to the IRS what form they’re in: cash, charges - it’s all the same as far as they’re concerned. The IRS assumes servers take in about 10% of the restaurant charges as tips in the absence of any other documentation. "

Not sure how to connect between Points A and B except to say that there is a huge, stinky swamp of fetid slime in between.

Well, employers simply can’t make shit up and add it to the w-2. The IRS really doesn’t like this. So, unless the IRS has told them specifically (in writing) differently, it’s 8% and has been for a long time. I accept “about 10%” as being about the same as 8%.

Note that at least two other posters in that other board also say it’s 8%.

I suggest the so-called “alternative system” is in fact the huge majority; the US is the only developed economy I’ve been to or know about where it is legal to pay servers as little as it is in the US, so that it is impossible to live off the paid wage and tips are a must. I’ve seen them go from 10%-12%-15%-18% and now not uncommonly 20%, as the minimum wage has declined.

Yes the theory may well be that this encourages “good service” but it also defines good service as that which extracts the highest tips. I’ve always found the so-called good service in the US to be servile and out-and-out annoying; the constant interruptions of “how is that entree working out for you sir” is not good service, it’s a reminder that “see how attentive I am? How about 20%?”. It’s more a guilt trip than a genuine reward for good service, which IMO means in part to leave me the hell alone unless I clearly want something.

Leaving a mandatory tip (as it is in most US restaurants) does not encourage good service, it just enables the on-going pretense of low prices. Restaurants can advertise main courses of, say, $20 when the real price is more like $24. I believe this is the same psychology of quoting taxes separately from prices as is endemic in US stores, hardly anything actually costs what’s on the price sticker. The thinking here is I think to throw in your face the amount the evil government costs you, and damn the convenience of the customer when you tender say $4 for a $3.95 item only to find its actual cost is $4.06, and end up with .94c weighing down your change pocket. And they get to pretend the take-away price is less than it actually is.

Interesting. I’ve spent a total of about 20 weeks in NZ with no evidence of any notable restaurant service deficiency to show for it.

(Tell them to try the Dancys Pass Inn next time they visit the South Island.)

Well, yes, but it’s not an in-the-face-your-government-is-evil-maneuver. In most cases, it’s the government that mandates it under force of law.

No one is ever surprised by this; unless you’re some sort of foreigner, it’s expected. Everyone knows that a $3.95 item isn’t going to ring up at exactly $3.95 after sales taxes are applied. There’s also the added factor that in some states, every county and/or city has a different taxation level. It’s really nice to compare apples with apples. On that note, how do you do that in VAT countries? How much am I paying in taxes? Is the price difference due to market gouging, or VAT, or short supply here, or some other consideration?

And for convenience, well, either carry change, write a check, or use a credit/debit card.