The amount Canadians are being asked to tip when paying with credit or debit cards is going up, according to industry watchers, and it could be encouraging Canadians to be more generous with gratuities.
A survey conducted by Restaurants Canada in April 2022 found that when dining out at a table service restaurant, 44 per cent of 1500 Canadians surveyed said their tips are higher compared to before the COVID-19 pandemic.
Suggested tips are increasing as well, according to CBC Calgary restaurant reviewer Elizabeth Carson, who noted prompts on credit card machines that previously asked for tips of 10 to 20 per cent have now crept up to 18, 20 or 25 per cent.
Carson has also been asked to tip as much as 30 per cent, and said she finds the higher prompts annoying. It's leading to an overall feeling that could be called tip-flation.
"Because food and wages cost more, the bill is now 10 per cent higher than it used to be. So it still equals a very large tip because the bill is so high," said Carson.
The restaurant reviewer, who typically eats out three to six times a week, started noticing this trend during the first COVID-19 lockdown.
"Restaurants couldn't do anything but takeout. People felt very badly for restaurant workers, and so people were leaving much higher percentages than the suggested tip levels," said Carson.
Carson suggested restaurants noticed that customers were willing to tip more, so they began asking for more.
How your choices are shaped
While a customer's choice may feel like their own,
decisions like how much to tip can be influenced by a theory called
"choice architecture," or how choices are presented to us.
Simon Pek of the University of Victoria's Gustavson School of Business looks at these influences in his research on tipping practices.
The pre-set choices for a tip at the end of your restaurant transaction are an example of choice architecture, according to Pek.
"When you see the point-of-sale device, the message being sent to you is that tipping is expected or is a norm in this particular context," he said.
"The first number you see,
or the range you see in front of you
influences people's decisions and perceptions about what the right tip to do in that particular context is."
"So if those numbers are higher, it makes us think that a higher tip is more appropriate in this context."
Unclear how often 30 per cent tips happen
Financial technology companies such as Square or Moneris don't share data on how often Canadians choose the 30 per cent tip option.
However, Square did confirm that it is up to sellers and retailers to enable and customize the tip settings on point-of-sale terminals.
Some restaurateurs have said raising the tip options for customers who pay by debit or credit card could backfire, including Jacquie Titherington, a server and manager at Blue Star Diner in Calgary.
"I feel like it's pushing something that isn't necessarily going to work in favour of the employees because I think that when people see that, it might be a bit of a turnoff because it seems excessive," said Titherington, who has 26 years of experience in the restaurant industry.
Zoe Smith, who recently left her job at a pub in Victoria to go travelling, says she can't afford to leave a 30 per cent tip when she dines out — so she doesn't expect customers to either.
"I think when I do a good job, I expect no more than 18 per cent. And if I receive more than that, I'm happy and grateful, but … we're all kind of struggling out here, like everyone is trying to make ends meet," said Smith.
Between July 2020 and July 2022, Square tracked the amount that Canadians tip on in-person transactions. The average gratuity hovered around 17 per cent nationally, which was up one per cent from pre-pandemic times.
Provincially, British Columbians left the lowest tips — an average of 16.7 per cent, compared to Newfoundlanders who were Canada's top tippers according to Square's data, with an average gratuity of 18.6 per cent.
Tip distribution can vary by province
In Canada, either the employee or the employer can control the distribution of gratuities.
In restaurants where servers collect all tips from customers, they will often pass on a percentage of those earnings to their coworkers such as hosts and hostesses, bussers, dishwashers and cooks.
When tips are controlled by the employer, they can be pooled together and distributed to staff through a tip-sharing arrangement set out in an employment contract.
In some cases, restaurant owners are included in this arrangement and take what's called the house cut. However, this practice is illegal in Ontario, Quebec and New Brunswick and a grey area in many other jurisdictions, including Alberta.
When Sean Gandossi worked at a pizza takeout counter in Calgary, he never saw any of his tips.
"We did have a tipping option on the [point-of-sale] machine there… and we made great money in tips, like some nights it was upwards of $1,000 but none of that money went to us at all," said Gandossi.
The owners told him they reinvested those tips into the business and Gandossi, who was 17 years old at the time, didn't argue with the arrangement because he was making $17.50 per hour.
"When you're kind of a bit younger too, you know, you think, okay, well, I'm making more than minimum wage … so, you know, I didn't complain about it much because I just didn't really know much better," he told CBC Radio's The Cost of Living.
Ask who gets your tip, no matter the percentage
Gandossi said he believes most customers were unaware that their tips were going to the owners of the restaurant and not the staff.
"You're the one giving them the machine, right? You're the one kind of prompting the tip selection or the tipping option," said Gandossi.
"It's kind of like when you have a tip jar out. You're going to assume if you put money in the tip jar that the person you see, they're going to be the ones getting the tips."
Experts such as tipping researcher Simon Pek say if a customer wants to know where their tip is going, they should ask.
Tip-flation has some restaurants asking for up to 30% in tips | CBC Radio
Aug. 10, 2022 "You tip your hairdresser, but what about your mechanic? Expect to see more 'tip creep'": Today I found this article by Laura McQuillan on CBC:
You probably tip the person who cuts your hair. Should you do the same for the person cutting your lawn?
Customers are increasingly seeing a gratuity option on card payment machines in industries where tipping was never previously part of the cost, from auto shops to fast food giants like Subway and Domino's.
The phenomenon, dubbed "tip creep," is leaving a bad taste for some consumers, who have vented online about being asked if they want to pay an extra 15 per cent or more on top of the price of a takeout pizza, oil change or propane tank refill.
"Tipping is spreading to a lot more places right now, so where we wouldn't have previously been prompted to tip, now it seems to be a lot more common," says Simon Pek, an associate professor at the University of Victoria's Gustavson School of Business who researches tipping practices.
As customers shift away from carrying cash, it's easier than ever for any business to ask for a little bit of extra money by adding the automatic prompt — what psychologists call a "tip nudge" — to their card payment machine.
Ten years ago, the tipping function on payment machines was "an afterthought" for most businesses, says Alex Povolotski, co-owner of PBH Canada, a provider of point-of-sale terminals and other merchant services.
Today, the tip function is automatically activated for bars and restaurants, but other companies are increasingly requesting it, too.
"Anybody — a bakery, a taxi driver, a car mechanic, a supermarket — can have it," Povolotski says.
'It's definitely a reward'
Gilbert Mofleh is one of those mechanics. When he and his business partner bought and took over The Car Clinic in Ottawa earlier this year, the card payment machine already had tipping activated — and they decided to keep it that way.
"As a mechanic, you get some people that do appreciate the fact that you worked on their car and they'll give you a little tip, but it's not very common," Mofleh says. "When it does happen, it's definitely a reward, like, you've done a good job."
He says few customers complain about the tip option, but he is careful to skip past it before handing over the machine if it's a particularly pricey job.
"I don't want a tip added to a $2,000 bill."
But why do Canadians tend to tip their hairstylist and not their mechanic?
Mofleh ponders the question for a second.
"If I had to guess, I would say because of the expense," he said. "When you go to the hairdresser, you're going to spend $100, maybe $200, maybe less … But if you were to put 15 per cent at the mechanic, you're spending an extra 300 bucks if [the price] was $2,000."
Option or expectation?
The contradiction creeps into other service industries, too — most people give a bartender a buck or two for serving a can of beer, but what about a liquor store clerk?
In private liquor stores in British Columbia and in some independent beer stores in Winnipeg, it's not unusual to see a tipping option at checkout — especially in places that share their licence with a hotel.
"We've always had the tip option as far as I can remember," says Arlene Guillemette, the long-time general manager of Tudor Liquor Store in Surrey, B.C., where tips are split among shop floor workers.
It sometimes gets a negative reaction from customers who don't normally shop at private liquor stores, but many regulars are happy to chip in, she says.
"There was a period when we had our machines break down, we got new ones and the tip option wasn't on and customers were actually saying, 'Hey, where's the tip option?'
"So we put it back on."
Both Mofleh and Guillemette say customers shouldn't feel pressure to tip at their businesses: it's an option, not an expectation.
"The most important [thing] is to tip your servers and your delivery drivers," Mofleh said. "It's not mandatory or important to tip if the [worker] doesn't rely on it."
The continuing creep of tip creep
There's limited research into what is motivating more businesses and sectors to opt into tipping, but Pek suggests the pandemic is a likely factor.
"There was a moment in time where people wanted to show appreciation for essential workers [through tipping]," he says, pointing out that many businesses stopped accepting cash because of hygiene concerns.
Inflation is another likely driver: faced with rising costs, employers might view tips as a way to address workers' demands for higher pay without actually increasing their wages, he says.
"We'll still see a lower sticker price, we'll still buy the product, and then adding 10 to 20 per cent after — it might be frustrating, but people still end up doing it, and that's often cheaper for a company than having to pay those wages."
Although a small number of businesses are moving in the opposite direction, ditching tips in favour of higher wages, Pek says he expects tip creep to continue into more and more businesses unless there is a wider public discussion about where, when and why we tip.
Povolotski agrees it's time for a rethink. He'd personally rather see workers be paid a living wage than rely on the tips that his point-of-sale terminals process.
"I just hope that the tipping culture tips — no pun intended — towards tipping for really good service, not by default, because then the meaning of tipping is lost."
You tip your hairdresser, but what about your mechanic? Expect to see more 'tip creep' | CBC News
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