In recent years, Canadians have witnessed a subtle but significant shift in the number of businesses requesting tips. Following COVID-19-related lockdowns, as restaurants and other public spaces reopened, many have said they noticed an increase in requests from establishments that didn’t normally ask for tips.
For many consumers, this has led to “tipping fatigue,” a feeling of exhaustion from being asked to tip more money at an increasing number of businesses.
The surge in tipping prompts may also disrupt the delicate balance some customers must strike between showing appreciation for a service and maintaining their budget. I’ll explore a few of the reasons behind this trend, as well as its implications and whether it’s here to stay.
THE ORIGINS OF ‘TIP-FLATION’
Canada has always had a strong tipping culture, and it’s common for customers to leave a gratuity for:
- Restaurant and bar service
- Valet service
- Cleaning services
- Taxi and transportation services
Prior to the COVID-19 pandemic, the standard tip for table service across the country, for example, was 15 per cent. However, a survey conducted by Restaurants Canada in April 2022 showed Canadians were tipping an average of 17.6 per cent of their bill.
According to the same survey, 44 per cent of respondents said they were tipping a higher percentage of their bill when dining at restaurants in person, compared to before the pandemic.
Referred to as “tip-flation,” this phenomenon has also seen an increasing number of businesses, from local cafes to nail salons and even fast-food restaurants, implement automated tip prompts at the counter, some running as high as 30 per cent.
A more recent survey conducted by the Angus Reid Institute earlier this year shows that more than 80 per cent of 1,610 respondents believe “too many places are asking for tips.” Based on the same survey, only 13 per cent of participants believe the quality of service has increased.
This comes at a time when inflation remains high in Canada. Although the annual rate currently sits at 3.8 per cent, it is still above the two per cent target set by the Bank of Canada. Experts say the elevated cost of living has likely contributed to the rise in requests for tips.
WILL TIP REQUESTS BECOME MORE WIDESPREAD?
In Canada, tipping is considered voluntary and carries no legal obligation. But customers may face undue pressure to leave a tip as many workers rely on gratuities to earn a decent living and stay on top of their bills.
At this point, so many businesses have incorporated tip prompts into their payment systems that they can seem hard to avoid.
However, a growing number of restaurants are experimenting with a service-included business model, where the cost of service is already included in prices listed on the menu. This removes the need for tipping and would see staff members receive higher wages.
One restaurant following this model is Sarang Kitchen in Toronto. In a telephone interview in September, owner Jennifer Low told CTVNews.ca that all her employees earn a wage of at least $23.15 per hour, explaining that staff members don’t argue over how tips are split and customers aren’t surprised when they receive their bills.
The Angus Reid survey carried out earlier this year shows 59 per cent of participants said they would prefer if Canada moved towards a service-included payment model.
POTENTIAL FOR UNINTENDED CONSEQUENCES
While those on the receiving end of gratuities see an obvious benefit, the increase in tip requests could put customers in an awkward position. Those who may have only been used to tipping waiters and bartenders during a night out are now being asked to tip for their morning coffee, afternoon lunch, and more.
The previously mentioned Angus Reid survey showed two concerning pieces of data:
- 78 per cent of participants said they believe tipping is no longer about “showing appreciation for a job well done”
- 73 per cent of respondents believe that tips exist as “a way for employers to underpay their employees”
These responses could imply that the majority of customers are unhappy about receiving requests to tip more money, instead viewing these prompts as a way for businesses to exploit both customers and their employees.
In the short term, the increase in tip requests could be positive, allowing hard-working waiters, valets, cleaners, baristas, and other service providers to take home more money.
However, there could also be some negative long-term consequences as once-loyal customers tire of the ever-increasing requests for money.
Tensions could form between customers and the businesses they frequent, causing them to visit these establishments less often, which could negatively impact the workers who rely on regular customers and their tips to make ends meet.
As many continue to struggle with the high cost of living, this could lead some Canadians to revisit their budget and cut back on unnecessary spending. Tipping for a coffee or sandwich that could be easily made at home usually falls into this category.
SHOULD YOU TIP BASED ON YOUR INCOME?
Traditionally, the amount you tip isn’t based on your personal income, but the pre-tax cost of the service provided.
A fair tip typically ranges from 15 to 20 per cent. For example, a $100 restaurant bill would garner a tip of $15 to $20. However, customers may choose to tip more or less based on their personal finances and/or the quality of service they receive.
Many tip-earners are paid minimum wage, which can be difficult to live on by itself. The extra money from gratuities might turn what would be a dead-end job into a long-term career.
Tipping can arguably be considered an ethical responsibility when visiting a business where workers are paid minimally. But what about businesses where employees already earn a fair wage? Here, I believe there’s greater sympathy for not leaving a tip if you are struggling financially yourself.
ADAPTING TO A CULTURE OF RISING TIP REQUESTS
Are you still unsure of when or how much you should tip?
For the time being, I’ll continue to tip 15 to 20 per cent for quality service and hospitality. However, I also believe that tipping has gotten out of hand.
Ultimately, leaving a tip is a choice, not an obligation. Tips should be given intentionally as a sign of gratitude for great service.
If you’re bothered by the increasing tip requests, the best thing you can do is support local service-included businesses where employees earn a fair wage, and you won’t be pressured into tipping. The more support these smaller companies receive, the more we might see other businesses adopt the same model.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
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