Tip-flation has some restaurants asking for up to 30% in tips

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. 

Cost of Living25:35Tip-flation has some restaurants asking for up to 30% in tips

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.

If those numbers are higher, it makes us think that a higher tip is more appropriate.- Simon Pek, Associate Professor, University of Victoria

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.

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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.