Diners disagree.
After holding steady for years, tipping at full-service restaurants fell to 19.4% in the second quarter of 2023, according the most recent restaurant trends report from online restaurant platform Toast. This is the lowest average since the start of the pandemic.
“Tip fatigue” is largely to blame, the report found.
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“During Covid, everyone was feeling generous,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to facilitate cashless tipping.
“The problem is it reached a standard that we couldn’t live with,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to facilitate cashless tipping. This trend, also known as “tip creep”, has been referred to by many. “
With more opportunities to tip and predetermined point-of-sale options that can range from 15% to 35% for each transaction, gratuity became less about rewarding good service, he said.
Now, consumers are pushing back.
Inflation, surcharges weigh on diners
Two-thirds of Americans have a negative view about tipping, according to a recent report by Bankrate, especially when it comes to contactless and digital payment prompts.
Higher prices due to persistent inflation have also left more consumers feeling cash-strapped.
Further, the increasing use of surcharges has played a role, according to Toast. Plam says that fees for health insurance of restaurant employees, credit card transactions, and even tap-water make diners leave less money on their total bill. He said that diners don’t have to leave as much tip if the restaurant covers health care. “That’s a quick calculation. “
These days, fewer consumers also said they “always” tip when dining out compared with last year, according to Bankrate, or for other services, such as ride-hailing services, haircuts, food delivery, housekeeping and home repairs.
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Yet, since transactions are increasingly cashless, having a method to tip workers in the service industry earning minimum or less than minimum wage is critical, Plam added.
Under federal law, employers can pay workers as little as $2.13 per hour — much less than the minimum wage — if the tips they receive bring them up to a baseline salary. Some states have eliminated tipping or increased the minimum wage hourly for tipped workers. Gusto found that tips were down slightly compared to a year earlier. Subscribe to CNBC YouTube.