U.S. consumers have a lot on their minds this holiday season.
Sky-high prices, glacier-like supply chains that slow product deliveries, and a rash of employment layoffs across the nation aren’t welcome news – especially with end-of-the-year shopping, parties, and decorating to handle.
One factor that escapes, or at least perplexes, the great American consumer is how much to tip for good service around Thanksgiving, Christmas, and New Year’s Eve, or any time of the year.
That trend is particularly pervasive right now, leaving more and more Americans wondering how much to tip – or whether or not to tip at all.
Seventeen percent of Americans are tipping less due to inflation, but 23% do plan to tip more during the holidays this year, according to a new report from the gambling industry company PlayUSA.
The payment methods Americans are engaging with are impacting tipping, too. The PlayUSA study noted 54% feel pressured to tip at iPad checkouts and 45% feel they’ve been tipping more recently because businesses are asking during checkout.
In a digital economy, many Americans seem to be taking orders from mobile payment machines instead of vice-versa. The study also stated that 51% of U.S. consumers who weren’t planning to tip for a service transaction wound up doing so when the machine asked them to tip.
“More Americans have been tipping since the onset of the pandemic in 2020,” the PlayUSA report noted. “Since COVID-19 began, more than 1 in 4 have been tipping a higher dollar amount, and nearly 20% are tipping a wider range of services. Inflation has been cutting down on some tips though with 17% admitting they’ve started tipping less because of the economy.”
However, it’s not just because of the pandemic that people are digging deeper into their pockets.
“45% feel they’ve been tipping more these past few years just because businesses are asking during checkout,” the report stated.
A Shift in Tipping Culture
When major impactors hit society, like the first coins used for currency in Lydia (now Western Turkey) in 600 B.C. or when the first credit card was whipped out in the early 1950s, financial customs tended to shift, too.
That’s the case with tipping, which has changed dramatically in the past few years thanks in part to a huge historical event and an emerging financial payment technology trend.
“There’s been a major shift in tipping expectations happened during the COVID-19 pandemic, as many traditionally cash-only small businesses switched to cloud-based point of sale systems,” said Fit Small Business hospitality and retail analyst Mary King. “Suddenly, society went from a tip jar on the counter to the ability to request and process credit card tips.”
As many small businesses struggled to retain staff during the pandemic, the promise of tips became an incentive. “Consequently, businesses like butcher shops and donut shops that might never have collected tips before started adding tip requests to their checkout process via mobile payment devices, in many cases,” King told TheStreet.
Online ordering, with its own tip process, also took off at the same time.
“Businesses that never offered online ordering added this service, and most online ordering tools include tipping as part of checkout, too,” King noted. “So yes, consumers are rightly feeling freshly bombarded with tip requests. The number of businesses requesting tips has definitely increased since 2019.”
Certainly, tipping isn’t going away anytime soon – not by a long shot.
“Currently, U.S. law permits businesses that employ tipped workers to pay less than the minimum wage,” King said. “While seven states have more restrictive laws that require employers to pay the full minimum wage to tipped employees, 43 states still allow tipped workers to be paid as little as $2.52 per hour.”
“As a result, a lot would have to change for the U.S. to move away from tipping in
service industries,” King added.
How to Handle the New Age of Tipping
If you find an iPad or other payment machine thrust under your nose this holiday season with a tip request staring you in the face, stand firm and make your own tipping choice.
“During the pandemic, those who prompted tips on an iPad were greatly affected by either being out of work for some time or had been on the front line at a vulnerable time, so it felt right to add a tip given those circumstances,” said Gift of College, Inc. chief operating officer Patricia Roberts. “Now that life is back closer to normal, consumers are wondering what they are tipping for and who is actually receiving the tips.”
One good piece of advice is to dial back your personal time machine and treat 2022 like 2019 – with the same tipping mindset you’ve always had.
“Continue tipping in businesses where you traditionally tipped before 2020,” King advised. “If you tipped servers and cab drivers in 2019, keep doing that.”
In businesses that have newly begun requesting tips– the donut shop where you pick up pastries for the office, the butcher shop where you bought your Sunday roast– there is no need to tip, or to be overly generous, King noted.
“But if you frequent a business– say you get Friday night takeout from the same spot every week– then it’s a good idea to tip at least every once in a while,” she said. “If you make special requests and the business meets them– like a florist that made a perfect bouquet for your mother’s birthday– and you have the option to tip, it's good manners to offer a little something as a thank you.”
Ultimately, tipping should not be forced on consumers, and if it is, those same consumers have the right to walk away without a tip or to tip generously. In that sense, cultural norms on tipping haven’t really changed over the years.
“A small tip amount is necessary for those who serve people,” said Kalkine Group chief executive officer Kunal Sawhney. “But the amount of tipping should be at the discretion of the customer. The conventional ways of tipping are the best, and not thrusting an iPad to pay a fixed amount as a tip isn’t the way to go.”
