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The history and future of tipping

7 January 2020 Small Business Advice

We look at the history of tipping and ask what’s next for the humble gratuity, as we rapidly move towards a cashless society.

We all like to reward good service, whether that’s a hairdresser who has done a particularly good job on a new style, or a taxi driver who has provided a particularly comfortable or speedy ride. When it comes to eating out, leaving a tip for good service (or a gratuity as it’s sometimes known) is extremely widespread worldwide, though the amount people leave and what for varies greatly between countries. 

But, where does tipping come from and why do we tip? Beginning in Tudor England as a way for overnight guests to give money to their host’s servants, the phenomenon of tipping has been around for the best part of 500 years. 

However, it really spread during the 18th Century in London’s coffee houses when customers would put money in a jar to ensure faster service from waiters. Although some have speculated that the word tip could stand for To Insure Prompt Service (TIPS), it seems unlikely, as acronyms were rarely used before the Second World War, and anyway, to be grammatically correct it would have to be To Ensure Prompt Service!

Instead, it’s most likely a variant of the German word ‘tippen’, meaning to tap or touch, and probably derives from tips, or money, being passed between petty criminals in return for information on horse races or intelligence on potential victims. In the same way as we still refer to tips today when it comes to betting.

Why do we tip?

This is more difficult to answer. In times gone by, it seems that aristocrats would often leave a tip in order to flaunt their wealth. However, now it’s more likely that we just want to reward good service, especially if it’s by lower paid workers. 

Research carried out for Paymentsense’s Restaurant Insights Reportshows that in the UK 88% of consumers usually give a tip when dining out. And while younger people are the least likely to have cash, they are also the most likely to leave a tip (95%).

Indeed, when it comes to tipping, cash remains king. Of those surveyed, nearly half of all consumers (48%) prefer to leave cash with the bill, compared to under one in five (18%) who prefer to pay via a card machine and less than one in ten (8%) who like a tip to be added to the bill. It seems when it comes to tipping consumers are keen to ensure the money goes to the waiter/waitress and think (rightly) by paying cash it is more likely to do so. 

However, only 14% of respondents say they tip the waiting staff directly, although this rises to nearly one in four (23%) among retired consumers. Perhaps this reflects an increasing concern among older age groups about who actually gets the tip. 

Changes in UK law

Indeed, who gets the tips remains one of the biggest sources of confusion for consumers. At the moment, most restaurants follow a cashless society which states that tips should be kept by waiting staff, although there is currently no legal obligation for them to do so. For example, some restaurants currently pocket all tips paid on cards while others deduct an admin charge before passing on a reduced amount to staff (in 2015 Pizza Express stopped deducting an 8% administration fee on card tips following a public outcry).

However, that’s likely to change. Announced in the recent Queen’s Speech, hidden among all the Brexit legislation, was the Employment (Allocation of Tips) Bill. If passed by parliament this will force all employers to pass on tips by law.

The government estimates that the change in law could help more than one million workers, many of whom are currently on the minimum wage. Either workers will be able to keep all of their own individual tips or they will receive a share of ‘pooled tips’ known as a ‘tronc’ (these are handed out via a Troncmaster, usually the head waiter rather than a member of management). However, all staff will continue to be under a legal obligation to declare earnings from tips and pay tax on them. 

Tips vs. service charge

Undoubtedly, the last few years have seen many restaurants automatically adding a service charge on to the bill – often between 10% and 15%. Sometimes this is just for larger parties of, say, six or more, but increasingly it’s added simply as a matter of course, especially in London. 

However, it’s worth bearing in mind that a service charge doesn’t currently have to go directly to the waiting staff although it should be used to boost overall staff wages. Nor in most cases it is obligatory for customers to pay it unless it is clearly stated to the consumer before ordering (even then it is possible to refuse to pay if service is poor). 

Tips for the future

Finally, what is next for the humble tip? While it seems the vast majority of us will continue to want to reward good service, inevitably most us will do so using a card as we move to an increasingly cashless society. One future option may be that waiting staff could have their own personal card machine so you know they are getting the tip directly. That way, there wouldn’t be all the confusion there currently is around who is actually benefitting from the payment.


 Tipping trivia 

  • In French the word for tip is pourboire meaning ‘for drinks’
  • In Japan and other Asian countries tipping is not commonplace and can be regarded as an insult, unless the money is put inside an envelope
  • The word “tip” was first used as a verb in 1707 in Irish playwright George Farquar’s play, The Beaux’ Stratagem
  • Some UK waiting staff are currently charged up to 15% admin fee on tips left on a credit or debit card
  • During the Soviet Era, tipping was known as chayeviye (“for the tea”) 
  • Tipping previously wasn’t allowed in Russia as it was considered as belittling to the working class, however, it has made a comeback in recent years

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