Mandatory tipping

Mandatory tipping (also known either as a mandatory gratuity or an autograt^[1]) is a tipping policy where the amount of the tip is added automatically to the customer's bill, without the customer determining the amount or even being asked.

It is implemented in several ways^[2]:

• Applying a fixed percentage to all customer's bills.
• In restaurants, applying a fixed percentage (~18%) for large groups, such as six or more.
• Adding gratuity on a customer by customer basis, based on the discretion of the server or manager.

A number of economists have suggested that tipping is economically inefficient, with suggesting that the mandatory gratuity system might solve some of these issues. 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.^[3] 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."^[4]

The discretionary form of mandatory tipping is extremely risky for businesses to use, as it allows for potential abuse or prejudice against the customer. For example, a manager might apply a large automatic gratuity to an elderly customer whom they predict will not look at the bill closely enough to be a savvy consumer. Another situation might have a server apply an autograt to a table that might stiff him or her on the tip because of the ethnicity of the customer(s).^{[citation needed]}

Summary

General summary

Even the bars in New York City's borough of Manhattan have instituted mandatory tipping in recent years.^[5] People find this to be bothersome; particularly those who are not aware that the tipping is used to subsidize the sub-standard pay at the workplace.^[6] In the past, a waiter at a Hard Rock Cafe in London, England has criticized the low wages to the popular press.^[6] Employees and customers at all Hard Rock Cafe locations are being played against each other.^[6] Mandatory tipping, or even voluntary tipping, is illegal in some places around the world like Australian casinos.^[7] Japanese people find mandatory tipping to be confusing to their culture, and become offended if given a tip.^[8] The Chinese also frown upon tipping; except for those living in the semi-westernized regions of Hong Kong and Macau.^[9]

The New York Times states that "a mandatory gratuity is just a tip, and thus not mandatory.^[10]" People have been falsely arrested in the United States for not paying a mandatory tip and given legal charges against them.^[10][11] Several hundreds of dollars have been lost fighting the mandatory tips through lawyer's fees.^[10] The restaurants cannot legally force their customers to pay the gratuity, since the method is completely voluntary.^[10]

Carnival Cruise Lines along with Norwegian Cruise Line charge their patrons $10/day in mandatory tipping; this does not include extra gratuities for stateroom stewarts, alcoholic beverages, and the dining room team.^[2] While tipping is essentially the root of capitalism, mandatory tipping emerges when waiters see tipping as a right rather than a privilege that has to be earned.^[11]

Fast food restaurants will never charge mandatory tipping for their customers; despite the presence of tip jars.^[12][13] Tipping for non-table services is considered to be inappropriate.^{[12][13][unreliable source?]}

Labor laws around the world

Canada

Quebec and Ontario allow employers to pay lower minimum wages to workers who would reasonably be expected to be receiving tips.^[14] 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.^[15] 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.^[16]

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.^[17]

According to guidelines established by the Canadian Restaurant and Foodservices Association, autograts and any tip pool controlled and distributed by the restauteur 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 imcome 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 Act defines a tipped employee as anyone receiving more than $30 per month in tips, although several states set a lower $20 per month threshold.^[18]

References

1. ^ ""autograt" definition from Double-Tongued Dictionary". http://www.doubletongued.org/index.php/dictionary/autograt/. Retrieved 28 June 2010. 
2. ^ ^{a b} "Will mandatory service charges replace voluntary gratuities?". USA Today.com. http://pqasb.pqarchiver.com/USAToday/access/887933271.html?dids=887933271:887933271&FMT=ABS&FMTS=ABS:FT&date=Aug+26%2C+2005&author=Laura+Bly&pub=USA+TODAY&edition=&startpage=D.1&desc=The+tipping+point+%3B+Will+mandatory+service+charges+replace+voluntary+gratuities%3F. Retrieved 2011-06-02. 
3. ^ Margalioth, Yoram. "The Case Against Tipping". University of Pennsylvania Journal of Business and Employment Law 117 (9). 
4. ^ Ayres, Ian (2008-03-20). "The Racial Tipping Point". Freakonomics Blog (New York Times). http://freakonomics.blogs.nytimes.com/2008/03/20/the-racial-tipping-point/. Retrieved 2008-03-22. 
5. ^ "High-End Manhattan Bars Institute Mandatory Tipping". CBS New York. http://newyork.cbslocal.com/2010/11/01/high-end-manhattan-bars-institute-mandatory-tipping/. Retrieved 2011-06-02. 
6. ^ ^{a b c} Shankleman, Martin (July 18, 2008). "Hard Rock wages 'below minimum'". BBC News. http://news.bbc.co.uk/1/hi/business/7513273.stm. Retrieved April 2, 2010. 
7. ^ Tasmanian Gaming Control Act 1993
8. ^ "What to tip when travelling". Television New Zealand. AAP. August 30, 2005. http://tvnz.co.nz/content/607597/425829.html. Retrieved October 19, 2011. 
9. ^ A few tips on handling gratuities worldwide
10. ^ ^{a b c d} Gottlieb, Jane (September 15, 2004). "A Mandatory Gratuity Is Just a Tip, and Thus Not Mandatory, a Prosecutor Says". New York Times. http://www.nytimes.com/2004/09/15/nyregion/15tipper.html?_r=1. Retrieved June 6, 2011. 
11. ^ ^{a b} Gottlieb, Jane (November 20, 2009). "Couple arrested after refusing to pay tip at Pennsylvania pub". New York Times. http://www.dailyfinance.com/2009/11/20/couple-arrested-after-refusing-to-pay-tip-at-pennsylvania-pub/. Retrieved June 6, 2011. 
12. ^ ^{a b} "Miss Manners Guide to Excruciatingly Correct Behavior, Freshly Updated" by Judith Martin, p. 762. 2005. ISBN 0-393-05874-3
13. ^ ^{a b} Emily Post Institute—Tip Jar Survey Results
14. ^ "Minimum Wage Rates Across Canada." Manitoba Labour and Immigration.
15. ^ "Minimum Wage - Ontario Ministry of Labour". http://www.labour.gov.on.ca/english/es/pubs/guide/minwage.php. Retrieved 2010-04-14. 
16. ^ Aulakh, Raveena (2010-04-13). "Restaurant bosses take bigger share of the tip". Toronto Star. http://www.thestar.com/news/gta/article/794726--restaurant-bosses-take-bigger-share-of-the-tip?bn=1. Retrieved 2010-04-14. 
17. ^ McCracken, D.L. "Revenue Canada to Tax Wait Staff's Tips." HalifaxLive.com. 2005-05-23.
18. ^ "Minimum Wages for Tipped Employees". Department of Labor. http://www.dol.gov/esa/whd/state/tipped.htm. Retrieved 2009-09-01. ^{[dead link]}