Personal finance

‘Tip fatigue’ is real. Here’s when to leave 20%, and when it’s OK to leave less

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Thanks to “tipflation,” a 20% gratuity isn’t what it used to be.

With more opportunities to tip and pre-determined point-of-sale options that now range from 15% to 35% for each transaction, tip expectations are growing, whether consumers like it or not.

And most don’t: Two-thirds of Americans have a negative view about tipping, according to a recent report by Bankrate, particularly when it comes to the contactless and digital payment prompts that have popped up nearly everywhere since the pandemic. The trend is also referred to as “tip fatigue.”

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“Sometimes you tip to reward good service, but only at restaurants do I tip out of obligation,” said Michael Lynn, a professor of consumer behavior and marketing at the Cornell University School of Hotel Administration.

Otherwise, it depends, Lynn said. “I don’t tip for carry out or counter service,” he added. “I don’t tip the Amazon delivery guy but I do tip the pizza delivery guy.”

Tipping 20% at a sit-down restaurant is still the standard, most etiquette experts say. But there’s less consensus about gratuity for a carryout coffee or other transactions that didn’t involve a tip at all in the past.

While tipping at full-service restaurants has held steady, tips at quick-service restaurants by guests fell to a five-year low of 16.7% at the start of 2023, according to Toast‘s most recent restaurant trends report.

These days, fewer consumers also said they “always” tip when dining out compared with last year, according to Bankrate, or for other services, such as ride-shares, haircuts, food delivery, housekeeping and home repairs. 

“It’s still OK not to tip,” according to Jaime Peters, Maryville University’s assistant dean of accounting, finance and economics. “It really is a tip; it is not obligatory.”

Peters said she primarily tips 20% in a sit-down restaurant, but less for other transactions.

Some workers rely on tips

In most other countries, “tipping remains a small gesture of gratitude,” Peters said.

But in the U.S., tips make up a larger part of workers’ pay, particularly in industries like entertainment, food service, and leisure and hospitality.  

In some of those jobs, workers make less than minimum wage because they are considered “tipped employees.”

Under federal law, employers can pay workers as little as $2.13 per hour — much less than the minimum wage — if the tips they receive bring them up to a baseline salary. (Some states are now increasing the hourly minimum wage for tipped employees or eliminated tipping wages altogether.)

This applies primarily to restaurant workers, although other employees who receive more than $30 a month in tips may qualify.

“Recognize that many service industry workers heavily rely on tips to make a living,” said Heather Altepeter, CEO of National Merchants Association.

“While tipping fatigue can be a concern, consider the livelihood of these workers who depend on gratuities for their income.”

For these workers, tips can boost wages by about 25%, according to data from payroll platform Gusto.

“Tips play a significant role in compensation, although it can vary quite a bit,” said Luke Pardue, an economist at Gusto. 

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