While canceling tips in traditional retail settings is widely supported by customers and is a common practice, the issue is more complex for service-oriented businesses like coffee shops or takeout restaurants, where "tip fatigue" is affecting customer sentiment.
The arguments for stores canceling tips center on improving employee compensation and customer experience, while arguments against often relate to employee earning potential and business flexibility.
Reasons stores should cancel tips
Improves the customer experience
Reduces "tip fatigue" and guilt: Many customers feel frustrated and pressured by the increasing number of tipping prompts at checkout terminals for services that are not traditionally tipped, such as picking up takeout. Canceling tips at the point of sale would alleviate this stress.
Eliminates confusion: Since tipping norms are established for sit-down dining but not for retail or counter service, many customers are confused about when and how much to tip. Canceling the option removes this guesswork entirely.
Increases fairness for employees
Removes the racial and gender bias of tipping: Research shows that tipping can perpetuate existing biases against workers who are women or people of color. A no-tipping model removes this subjective factor from compensation.
Promotes equitable pay: In businesses that use tip-sharing, "no-tipping" policies allow employers to increase pay for all staff, including often-underpaid back-of-house workers like cooks and dishwashers.
Provides a stable wage: For employees, a higher, set hourly wage provides a reliable income, which is more secure than relying on the variability of tips.
Offers businesses more control
More flexible payroll management: Tipping shifts the responsibility for paying workers onto customers. By incorporating a service charge or higher menu prices, stores gain more control over compensation.
Higher-quality applicants: Some no-tipping restaurants found that a stable, higher hourly wage, combined with a positive work culture, helped them attract talented employees.
Reasons stores may prefer not to cancel tips
Loss of income for employees
Top earners may leave: High-performing or "gifted" servers and baristas can earn significant income from tips. When businesses eliminate tipping, these top earners may leave for other companies where tipping is still an option.
Overall pay may decrease: A study by payroll company Gusto found that retail employees who are prompted for tips often have a lower base pay than their non-tipped retail counterparts, and even with tips, they earn less overall.
Increased prices could drive away customers
Risk of losing business: In competitive markets, stores that raise prices to account for higher wages could lose business to rivals who maintain the traditional tipping model and lower prices. Some restaurants that have experimented with no-tipping policies have reverted back due to customer and staff complaints.
Customer resistance: Businesses that have tried to switch to a no-tipping model often face customer resistance, particularly if they significantly increase menu or product prices to compensate.
Lost flexibility for businesses
Less flexible payroll: Tipping offers businesses some financial flexibility. As one economist noted, "Tipping gives them more flexibility," allowing them to avoid locking into higher wages when faced with economic uncertainty.