A Guide To Tipping

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Shorter Version


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Recently The Washington Post published an article about a $1,000 tip that a waitress in Florida recently received from a famous basketball player. In this case, it was the size of the tip rather than the act of tipping that made this story news.

Normally workers receiving tips is not considered significant unless there is something unusual associated with the tip like the size or when someone leaves a bad message on the receipt

The reason that these stories stand out is that most of us view tipping as a natural response for receiving certain services, such as dining out or getting a haircut. It generally doesn’t occur to us that tips should receive any special attention.

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The history of tipping

The history of how the practice of paying tips came to exist is interesting. According to research done by the Ford Foundation, the practice of tipping in the United States got its roots during Slavery. Restaurant owners preferred to have newly freed slaves receive compensation from customers tips rather than having to pay them a wage directly. 

Since then little has changed with tipping. Today, employers are required to pay workers who receive tips at least a federal minimum hourly wage ($2.13 an hour as of this writing) but it is far from a living wage on its own, which is why tips are so crucial to the economic viability of the workers who receive them.

Restaurants in some cities have experimented with ending tips in favor of paying their employees a regular hourly wage. In 2019, New York Times columnist, David Brooks, extolled the virtues of ending the practice of tipping in his essay, “The Tipping System Is Immoral.” Despite these notable efforts, tipping in the service and retail industries remains an ongoing practice.

Who receives a tip

When you think of tips, you might automatically think of waiters and waitresses. But, there are numerous jobs where tips are a significant part of the wage package. This includes (but is not limited to) bartenders, valets, hotel bellhops and housekeepers, taxi and Uber/Lyft drivers, food delivery persons, hairstylists, massage therapists, nail technicians, and pet groomers.

The two questions that often come up with tipping is how much to tip and if there are any situations where you would not tip.

Generally, it’s considered proper etiquette to tip 15% for adequate service and 20% for excellent service.

If sales tax is charged to your bill, it is up to you to decide whether you will base the tip on the pre or post-tax amount. 

One thing to keep in mind is whether the establishment you are receiving service from will allow you to include the tip with your bill and pay with a debit or credit card, such as at restaurants. Or, if the place expects you to pay the tip separately with cash like at hotels and some beauty or nail salons.

Even though using debit and credit cards to pay for things rather than cash is very common in the US, you probably should still carry some cash with you (small bills are better) so you do not find yourself unable to tip in a cash-only tips environment.

Struggle with doing the math?

What if you struggle with doing the math in your head? No worries! You can use a calculator or you can download an app made just for calculating tips. Having this tool can be especially useful if you find yourself in a situation where you are sharing the bill with someone (this most commonly happens at dining facilities) and you want to make sure each person is paying their fair share including their portion of the tip.

Keep in mind

There are people that you might want to tip but technically they can’t accept tips. These people include teachers, medical personnel, laborers and tradespeople, and some grocery employees (check with the store first). Finally, if you are going to be traveling outside the US find out what the tipping customs are before you go. The last thing you want to do is cause offense because you didn’t take the time to educate yourself.

Actionable Steps


1

Account for tipping in your budget

If you plan your spending in advance, make sure to include the costs of tipping (15-20%) for any service-based activities.

2

Do some quick research

Research ahead of time whether the establishment you will be visiting accepts tips through an electronic payment such as debit or credit cards or if they only accept cash. Certain jobs like valet or hotel porter will only accept cash tips.

3

Download an app

If you do not want to do the math in your head or carry a physical calculator, search for and download a free tip calculating app.

4

Agree on the tip and split accordingly if you are with a group

If you are sharing one bill between 2 or more people at a restaurant, make sure to agree on a tip amount and include an equal portion of the tip in each person’s share of the bill.

5

Ask before you visit

If you are unsure about whether an establishment’s employees can accept tips or any other etiquette about tipping, ask before you visit.

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About the Author


Dawn Torres-Gale, AFC

Dawn Torres-Gale, AFC

Accredited Financial Counselor

In 2008, Ms. Torres-Gale was chosen by the Financial Industry Regulatory Authority (FINRA) Foundation to be part of a select group of military spouses. Through this, she received FINRA sponsored training from the Association of Financial Counseling, Planning and Education and became an Accredited Financial Counselor® in February 2012.
Full Bio | Connect With Dawn | LinkedIn


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