Mandatory tipping
Encyclopedia
Mandatory tipping]] is a tip which is added automatically to the customer's bill, without the customer determining the amount or being asked. It may be implemented in several ways, such as applying a fixed percentage to all customer's bills, or to large groups, or on a customer by customer basis. Some economists have argued that tipping is economically inefficient, and suggested that mandatory gratuity might solve some of this issue.
's borough of Manhattan
have instituted mandatory tipping. The BBC has reported that some find the practice bothersome; particularly those who are not aware that the tipping is used to subsidize the sub-standard pay at the workplace. One waiter in London, England
has criticized the low wages to the popular press.
Mandatory tipping and voluntary tipping are illegal in some cases: Australia
n casino employees, and US government employees, for example. Tipping is not generally part of Japan
ese culture, and can be confusing or offensive. Tipping in China
is frowned upon, except for those living in the semi-westernized regions of Hong Kong
and Macau
.
A 2004 article in the New York Times stated that "a mandatory gratuity is just a tip, and thus not mandatory", and noted that individuals have been falsely arrested in the United States
for not paying a mandatory tip. The New York restaurants cannot legally force their customers to pay the gratuity, since the method is completely voluntary.
Some cruise lines charge their patrons $10/day in mandatory tipping; this does not include extra gratuities for stateroom stewarts, alcoholic beverages, and the dining room team.
Judith Martin in her 2005 manners book opines that Fast food
restaurants will never charge mandatory tipping for their customers, despite the presence of tip jars, and considers tipping for non-table services to be inappropriate.
Ian Ayres, Fredrick E. Vars & Nasser Zakariya published a paper suggesting that tipping contributed to racial prejudice
, since ethnic minorities would often be less able to pay a large tip. Another paper by Yoram Margalioth of Tel Aviv University
argued that there was a negative externality associated with tipping, and that the practice facilitated tax evasion
. Two other American studies have contributed to the thesis that tipping is racially discriminatory, finding that ethnic minority servers and taxicab drivers received lower tips on average than their white counterparts. In the study of the servers, an attempt by the author to isolate other possible contributing factors, such as poor service, found that "After controlling for these other variables … the server race effect is comparable across customer race."
and Ontario
allow employers to pay lower minimum wage
s to workers who would reasonably be expected to be receiving tips. In Ontario
, the minimum wage
is $10.25 per hour, with exceptions for students under 18 years old and employed for not more than 28 hours a week, who are paid $9.60 per hour; and both liquor and restaurant servers, who are paid $8.90 per hour. On April 13, 2010, the Toronto Star
reported since 2009, it has become common for restaurant servers to give part of their tips to the business they work for.
Workers who receive tips are legally required to report the income to the Canada Revenue Agency
and pay income tax
on it. In Quebec, the provincial government automatically taxes servers 8% of their sales whether a gratuity was received or not. In other provinces, however, many workers have been known to report no income
from tips at all or, perhaps more commonly, to "lowball" the figure. In response, the CRA has said that it will closely check the tax returns of individuals who would reasonably be expected to be receiving tips to ensure that the tips are reported realistically.
According to guidelines established by the Canadian Restaurant and Foodservices Association
, autograts and any tip pool controlled and distributed by the restaurant is legally subject to income tax and other mandatory deductions before being paid to the servers. All other gratuities are deemed direct tips and it is the server's responsibility to declare them as taxable income when filing for income tax.
defines a tipped employee as anyone receiving more than $30 per month in tips, although several states set a lower $20 per month threshold.
General discussion
Some bars in New York CityNew York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
's borough of Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
have instituted mandatory tipping. The BBC has reported that some find the practice bothersome; particularly those who are not aware that the tipping is used to subsidize the sub-standard pay at the workplace. One waiter in London, England
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
has criticized the low wages to the popular press.
Mandatory tipping and voluntary tipping are illegal in some cases: Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
n casino employees, and US government employees, for example. Tipping is not generally part of Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese culture, and can be confusing or offensive. Tipping in China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
is frowned upon, except for those living in the semi-westernized regions of Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
and Macau
Macau
Macau , also spelled Macao , is, along with Hong Kong, one of the two special administrative regions of the People's Republic of China...
.
A 2004 article in the New York Times stated that "a mandatory gratuity is just a tip, and thus not mandatory", and noted that individuals have been falsely arrested in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
for not paying a mandatory tip. The New York restaurants cannot legally force their customers to pay the gratuity, since the method is completely voluntary.
Some cruise lines charge their patrons $10/day in mandatory tipping; this does not include extra gratuities for stateroom stewarts, alcoholic beverages, and the dining room team.
Judith Martin in her 2005 manners book opines that Fast food
Fast food
Fast food is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with preheated or precooked ingredients, and served to the customer in a...
restaurants will never charge mandatory tipping for their customers, despite the presence of tip jars, and considers tipping for non-table services to be inappropriate.
Ian Ayres, Fredrick E. Vars & Nasser Zakariya published a paper suggesting that tipping contributed to racial prejudice
Racism
Racism is the belief that inherent different traits in human racial groups justify discrimination. In the modern English language, the term "racism" is used predominantly as a pejorative epithet. It is applied especially to the practice or advocacy of racial discrimination of a pernicious nature...
, since ethnic minorities would often be less able to pay a large tip. Another paper by Yoram Margalioth of Tel Aviv University
Tel Aviv University
Tel Aviv University is a public university located in Ramat Aviv, Tel Aviv, Israel. With nearly 30,000 students, TAU is Israel's largest university.-History:...
argued that there was a negative externality associated with tipping, and that the practice facilitated tax evasion
Tax avoidance and tax evasion
Tax noncompliance describes a range of activities that are unfavorable to a state's tax system. These include tax avoidance, which refers to reducing taxes by legal means, and tax evasion which refers to the criminal non-payment of tax liabilities....
. Two other American studies have contributed to the thesis that tipping is racially discriminatory, finding that ethnic minority servers and taxicab drivers received lower tips on average than their white counterparts. In the study of the servers, an attempt by the author to isolate other possible contributing factors, such as poor service, found that "After controlling for these other variables … the server race effect is comparable across customer race."
Canada
QuebecQuebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
and Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
allow employers to pay lower minimum wage
Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
s to workers who would reasonably be expected to be receiving tips. In Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
, the minimum wage
Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
is $10.25 per hour, with exceptions for students under 18 years old and employed for not more than 28 hours a week, who are paid $9.60 per hour; and both liquor and restaurant servers, who are paid $8.90 per hour. On April 13, 2010, the Toronto Star
Toronto Star
The Toronto Star is Canada's highest-circulation newspaper, based in Toronto, Ontario, Canada. Its print edition is distributed almost entirely within the province of Ontario...
reported since 2009, it has become common for restaurant servers to give part of their tips to the business they work for.
Workers who receive tips are legally required to report the income to the Canada Revenue Agency
Canada Revenue Agency
The Canada Revenue Agency is a federal agency that administers tax laws for the Government of Canada and for most provinces and territories, international trade legislation, and various social and economic benefit and incentive programs delivered through the tax system...
and pay income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
on it. In Quebec, the provincial government automatically taxes servers 8% of their sales whether a gratuity was received or not. In other provinces, however, many workers have been known to report no income
Unreported employment
Unreported employment, often referred to colloquially as working or being paid under the table or cash-in-hand, is employment that is not reported as required by law to the appropriate local, state or provincial, or national government agency. This is often done by the employer or the employee in...
from tips at all or, perhaps more commonly, to "lowball" the figure. In response, the CRA has said that it will closely check the tax returns of individuals who would reasonably be expected to be receiving tips to ensure that the tips are reported realistically.
According to guidelines established by the Canadian Restaurant and Foodservices Association
Canadian Restaurant and Foodservices Association
The Canadian Restaurant and Foodservices Association or CRFA is an industry and advocacy group organizing the Canadian restaurant, foodservice and catering industry....
, autograts and any tip pool controlled and distributed by the restaurant is legally subject to income tax and other mandatory deductions before being paid to the servers. All other gratuities are deemed direct tips and it is the server's responsibility to declare them as taxable income when filing for income tax.
United States
Laws in the states of Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington require all employees to be paid at least minimum wage. However, it is still customary to give standard tips in those places. Elsewhere, wage laws allow employers to credit an amount of earned tips against the minimum wage, allowing them to pay tipped employees less than minimum wage. As of September 2009, this reduction can be as low as $1.45 per hour in West Virginia, or as high as 100% in Virginia, reducing potential wages to $5.80 or $0 per hour, respectively. Which employees may have their wages reduced varies as well. The Fair Labor Standards ActFair Labor Standards Act
The Fair Labor Standards Act of 1938 is a federal statute of the United States. The FLSA established a national minimum wage, guaranteed 'time-and-a-half' for overtime in certain jobs, and prohibited most employment of minors in "oppressive child labor," a term that is defined in the statute...
defines a tipped employee as anyone receiving more than $30 per month in tips, although several states set a lower $20 per month threshold.