Guest taps credit card on mobile point of sale system to pay for his meal and leave a tip.

Tips for tipping: How to increase employees’ earnings without annoying your customers

Tuesday, July 18, 2023

The good old-fashioned tip jar that used to proudly sit on counters of businesses across the country seems to be a thing of the past. And it makes sense since the days of customers carrying cash are also largely behind us.

While tip jars might be on their way to becoming a relic of yesteryear, the practice of tipping is still alive and well — digitally, that is. As a result, the way people think and feel about tipping is changing.

But it all depends what side of the counter you’re on.

As a small business owner, you face a dilemma: You want employees to earn more by taking advantage of digital tipping options, but you don’t want to burn customers out. So, how do you strike the right balance? In this article, we’ll get to the bottom of just that.

Follow along as we dive into how attitudes around tipping have changed, what drove that change and how configuring tips properly in your point of sale system — and combining it with great service — can help fight tip fatigue, increase employees’ earnings and keep customers coming back:

How customers really feel about tipping — and why

Tipflation, tip creeping, guilt tipping, tip fatigue …

New tipping terms are springing up like mushrooms. And much like mushrooms, it’s a divisive topic. One that people have strong opinions about.

As a restaurateur, if you want to build a tipping structure that won’t rub people the wrong way, it’s important to understand those opinions. Let’s unpack your customers’ mindset.

The social experience of tipping: It’s complicated

Where leaving a tip was once a voluntary act of generosity and goodwill, today’s tipping can feel more like an anxiety-inducing guessing game. To put it bluntly, it’s complicated.

Not sure what we mean? Here’s a scenario to help explain:

Let’s say Bob orders a latte at his local coffee shop. The employee working behind the register takes his order without so much as a smile or hello. Then, the inevitable happens. The iPad swivels toward Bob with a series of tip options staring back at him.

His mind starts to race:

  • Do you tip a barista the same as you’d tip a waiter at a full-service restaurant?

  • Should you tip the same percentage for a to-go coffee as you would for a sit-down meal?

  • Does the quality of service impact your tip anymore?

  • Would you have tipped for this service five years ago?

The line behind Bob grows restless. He doesn’t want to look bad (even if it was lackluster service), so he begrudgingly accepts the first suggested tip amount he sees, blindly tapping his finger in a panic.

As he walks away, Bob gets a sinking feeling. He really didn’t mean to tip that much. But between the imploring eyes of the cashier and the line of waiting customers breathing down his neck, he felt pressured into it. Bob sips his cup of coffee — and sighs. After all that, his order came out wrong.

As a restaurateur, the last thing you want is for your customers to leave your restaurant with a bad taste in their mouth. But all too often, Bob’s experience is the status quo in 2023. As a Forbes study revealed, one in three people now feel pressured to tip, while 18% feel uncomfortable about tipping.

The question is, why?

Smiling barista hands customer coffee as he pays with card at the point of sale and answers tip prompts.

A brief timeline of tip fatigue

In recent years, the practice of tipping has expanded beyond traditional venues to quick service restaurants, curbside pickups, coffee shops, ice cream parlors, concession stands, movie theaters and more. Although tipping is nothing new in the US, developments over the past few years have changed the game. And no one seems to know the rules anymore.

Icon of person in mask

The pandemic

One big reason for this? COVID-19. Due to the severe hardships placed on workers in the hospitality or service industry during the pandemic, customers were willing to leave bigger tips for more services — services they didn’t normally tip for before the pandemic.

Statistics show tips for full-service and quick-service restaurants surged from 2020 to 2021. This trend seeped into 2022 but lost some steam. Now in 2023, it seems people have reached, well, their tipping point.

Icon of open sign

Post-pandemic

The overwhelming, constant nature of tip requests has led to a wave of tip fatigue. What does that mean? People who would normally be happy to tip are getting tired of it. Research shows Americans are tipping less regularly than they did during the pandemic — and less often than they did prior to the pandemic.

And it’s no wonder. When faced with ever-present tip prompts, people are unsure of when they should actually be tipping and what size tip is appropriate for which services (remember Bob?).

But regardless of the murky guidelines, customers still feel obligated to leave a tip. Which can stir up negative feelings on the lower end of the scale and cause customers to call it quits on tipping altogether on the more severe end.

Icon of value of money decreasing

Economic pressures

On top of that, after years of generous tipping finally taking their toll, rising inflation and a looming economic recession have arrived on the scene. With economic pressures cutting into purchasing power, people are growing more budget-conscious than usual.

Icon of online ordering

Declining service

One more factor driving tip fatigue? Poor customer service. Due to ongoing labor shortages, it’s a serious challenge for understaffed businesses to provide high-quality service while trying to keep their heads above water.

We get how difficult it is. But in customers’ eyes, not only are they being asked to tip more, but they’re being asked to do so in exchange for less-than-satisfactory service. And at the end of the day, it’s not a good recipe for inspiring big tips — or customer loyalty.

The digital experience of tipping: A tale of technology and tipflation

Perhaps the biggest contributor of all to our changing tipping culture is technology.

Swiveling point of sale touch screens and kiosks rose to popularity due to the demand for contactless digital payment options during the pandemic. Since then, far from reverting to pre-pandemic ways, technology-based tipping is here to stay. Tip requests, or suggested gratuity, seem to be everywhere you go — and it has fundamentally transformed the way we tip.

For businesses, digital tipping is a great opportunity to bring in more revenue for employees. For customers, it’s a little less rainbows and sunshine.

Many customers feel that while they’re already taking the hit of higher prices for goods and services due to inflation, they’re being asked to give even more with the inescapable tip prompts at the end of their transaction. Tip prompts that often ask for larger tips than usual (sometimes starting at 20% and reaching 35%). The result? One study revealed 65% of people tip at least 10% more when they tip digitally than they do with cash.

If you’ve been wondering what exactly tipflation is, this is it.

Here’s one more way to look at how tipping has changed: Instead of tipping being an activity the customer opts into as it has been in the past, it’s now an activity they have to opt out of. Why? Screens require customers to make a tip choice in order to complete checkout if they’re paying with credit card or debit card. In other words, there’s no way around it.

It’s easy to see why customers have mixed feelings about tech’s role in tips. But the moral of this story isn’t to avoid using technology for tipping at your restaurant. It’s to be considerate of how your patrons are feeling and to learn how to use technology in the right way. Speaking of…

How to find the right balance for configuring tips at your restaurant

Although customer attitudes towards tipping have seen better days, your employees still rely on tips. Which begs the question: What can you do as a small business owner to max your employees’ earnings without driving customers away?

Glad you asked.

Communication is key

We don’t have to tell you: Tips make up a large portion of your waitstaff’s salaries — especially if they’re getting paid a minimum cash wage. At the federal level, the minimum cash wage is $2.13/hr. However, this might look different depending on where you live since certain states have their own requirements.

A good amount of customers are generally familiar with this concept. But what they don’t always realize is that tips often benefit more than just their server. With tip sharing and tip pooling, other members of staff who are not tipped directly by the customer (think hostesses, bussers, food runners, etc.) may rely on shared server tips too. At some restaurants, they even leave separate line items for patrons to tip their server and the kitchen.

No matter how you decide to distribute tips at your restaurant, doing this one thing will save you a lot of headaches down the road: Communicate your tipping policy to your patrons.

If customers are hit with tip requests for multiple groups or are unsure about where their tip money is going (and are already struggling with tip fatigue), they probably won’t feel too warm and fuzzy about leaving one at your restaurant. That’s why it’s a good idea to educate customers about who exactly receives tips on your staff and why. Chances are, they’ll be less likely to feel blindsided and more likely to tip willingly thanks to your transparency.

Bottom line? Customers don’t want to feel they’re being taken advantage of or hoodwinked into doing something.

Customer uses their watch to pay with digital wallet at the point of sale.

Understand your customers' motivations

Despite the grumbling and griping, people (for the most part) are probably still going to leave a tip. A study on US tipping culture in 2023 reports that 95% of respondents say they tip at least some of the time, while 76% report always tipping. The top motivations for tipping include:

  • Helping service providers

  • Rewarding servers for their effort

  • Encouraging good service for the next visit

  • Gaining social approval (from observers and servers)

  • Abiding by social norms or fulfilling a social obligation to avoid disapproval

This tells us a few things. First, customers generally understand how little service workers get paid, and they want to help. They also see tipping as a fair exchange for good service.

Second, there’s a social element attached to tipping. And modern payment systems make tipping more of a public affair than ever before. Since those screens aren’t exactly shielded from curious eyes, that means customers have to declare how generous they’re feeling to everyone who has a view of the point of sale … which plays into the societal pressure to tip well.

The takeaway? Different customers have different motivations for tipping, but it’s important to be aware of them. They’ll help you better understand where your patrons are coming from — and make an informed tipping strategy.

You have options: Service charge vs. suggested gratuity

So, we’ve established that employees need tips and that customers generally want to tip. But how to handle it the right way? There’s no cut-and-dry answer, but you can make informed decisions based on your restaurant type and customers.

Your three main options are to:

  1. Leave an open-ended tip line with no suggested tip

  2. Include a set tip via a service charge or automatic gratuity

  3. Provide suggested tips via prompts on the point of sale screen or receipt

So, which one to choose? A survey shows that 63% of customers prefer free discretionary tipping over included service charges. However, take that with a grain of salt.

Icon of receipt with service charge

Service charges

If you’re not familiar, a service charge is when a server’s or bartender’s tip (usually around 18%) is included in the bill.

For some restaurants that pride themselves on exceptional hospitality, like fine dining or higher-end establishments, automatic gratuity often is the best course of action to ensure waitstaff is well taken care of. Another instance where this might make sense is for larger parties —usually of six or more guests. Again, this is to protect the server from doing taxing work without proper payoff.

If either of these situations applies to your restaurant, you’ll want to do as we discussed earlier and communicate about it with your customers. Sneakily slipping a service charge into the total amount without telling your customers won’t work in your favor. Adding a tip prompt on top of that definitely won’t. Double tipping only leads to angry customers. Best to avoid it from the start!

Icon of person requesting tip

Suggested tips

If you choose to go with suggested tip amounts, the same rules apply: Be upfront and honest.

For example, if you provide a few different tip amounts on the screen, but the default, preselected amount is 30%, a customer might accidentally select that and feel they’ve been tricked into it. And the employee is usually the one who will face the brunt of the backlash over it. It’s a good idea to leave suggestions in a way that doesn’t promote one option over another. After all, tipping should be the customer’s choice.

Now, let’s get into the weeds of different ways to configure suggested tip amounts based on price points, the kind of restaurant you run and the structure that makes the most sense for you.

Icon of paying for percentage of a pizza

Percentages

Percentage-based tipping is most common for sit-down restaurants. Diners in these types of restaurants are already used to tipping their server 15-20% of their total bill due to the waiter’s continuous service throughout their meal.

With modern point of sale systems, you should be able to customize your suggested gratuity percentages — and calculate them either with or without tax included. A common method is to suggest 10%, 15% and 20% options. But if your restaurant is a little more upscale, a 20%, 25% and 30% range might suit better. Keep your average customer in mind, as well as the average price of your menu items when selecting suggested percentages.

One more thing to consider — if you go the percentage route, it’s also a nice touch to include the dollar amount the percentage equates to on the screen or receipt. Most customers will appreciate not having to pull out their smartphone calculators to do the math themselves.

Icon of cash flow

Fixed dollar amounts

As far as fixed dollar suggestions go, this option is most widely adopted by quick service restaurants, coffee shops and bars.

Here’s why: If you run a coffee shop and your customers are regularly making low-dollar purchases, suggesting simple dollar amounts instead of percentages might yield better results for your staff.

These suggestions often look like $1, $2 or $3 tips for a coffee that costs around $5. A customer would probably balk at a 50% tip but look at leaving an extra $2.50 as not so bad. See the appeal?

Icon of online ordering app

Combination

We get it. It’s not always black and white. If your restaurant offers a wide range of menu prices or varies greatly depending on the time of day (perhaps you have a low-dollar lunch menu but increase prices for the dinner crowd), you may want to take a mixed approach.

This is when you alternate between suggested percentages and fixed dollar amounts for tips based on whether a purchase is above or below a certain price point. For example, you could set fixed-dollar gratuity suggestions for anything below $10, but change to percentages for anything above $10.

Whichever tipping strategy works best for your restaurant, here’s the golden rule: Be transparent with your customers, and don’t try to manipulate them with suggested tip ranges that will likely be out of their comfort zone. You might get a higher tip that one time, but will you get a repeat visit?

Smiling waiter takes tableside payment from customer with mobile point of sale system.

Great service trumps all

We saved the best tipping tip for last: The most foolproof way to get customers to tip well (and gladly) is to deliver great service. As it happens, that’s also the best way to get them to return to your restaurant.

Easier said than done, right? If you’re wondering how to train employees to provide great customer service, take a page out of Danny Meyer’s book and explore his top strategies for creating a culture of stellar hospitality.

Another piece of the puzzle? Let your employees know why they should deliver a great customer experience.

While some members of the younger workforce who are more accustomed to the digital age may expect a tip regardless of the quality of service, the research says otherwise.

According to one study, nearly 80% of participants said the size of their tip was directly proportionate to the service they received. This goes to show tipping is subjectively determined by the quality of the service.

Be sure to adjust your employees’ expectations during training — and let them know this is ultimately good news. Why? Because it gives them autonomy over their situation and empowers them to make a significant impact on the size of their tips through performance.

If your staff starts to implement small behaviors like increasing their number of visits to the table to check in, smiling, repeating customers’ orders after writing them down and exhibiting kindness and attentiveness — they might just tip the scale in their favor.

How technology can help

Keeping both customers and employees happy in general is difficult. It’s an even finer balance when it comes to tipping. But there’s no reason why you should navigate it alone.

Using the right technology in the right way can help your restaurant beat tip fatigue, increase employee earnings, keep customers coming back — and do it all without breaking a sweat.

Meet Heartland Restaurant point of sale. Our point of sale systems offer secure tip management features that make it easy to accept tips at the time of sale, collect post-authorization tips and track tips throughout shifts. Our tech also helps you take care of your people with secure tip cards, payout apportions, tip pooling and convenient server banking.

With Heartland Restaurant, you can:

  • Ensure staff is rewarded for great service: Make it simple to add a tip with a sleek, customer-facing touchscreen. Users can choose between two different types of tipping styles — or not tip at all.

  • Enable onscreen tipping: Customize suggested tip options and allow customers to make a tip selection before paying. Display a screen on the payment device where the customer can select their desired tip, whether it’s a suggested tip amount, a custom amount or no tip. You can also capture customers’ signatures on-screen or via a paper receipt.

  • Offer receipt tipping: Take a payment, then allow customers to add a tip later (also known as “Tip/Adjust”). You can print separate receipt slips for the merchant and customer, including tip and total lines, plus a line for the customer’s signature.

Best of all, our restaurant point of sale tech comes in different pricing plans, built for every budget.

Ready to unlock solutions that make every day work better for you, your customers and your employees? Learn more here.


Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us