A Fair Share: transparency in tipping

Unless you’ve been living under a rock for the last couple of years, you will have noticed that there is an employment crisis in the hospitality industry. We all know that retention is better than replacement- and that competition for GREAT team members is fierce. Katy Moses, MD at KAM, writes about our recent research, in partnership with TipJar, which shows the surprisingly significant role that fair and transparent tipping can play in attracting both employees and actually also customers.

“As a nation, tipping may not be as embedded in our culture as in the US, but Brits do believe it has a rightful place within UK hospitality. The research showed that only 1 in 10 UK consumers are against the concept of tipping, with the vast majority actively supporting the act of rewarding staff for a job well done.

The survey of 500 customers and 250 hospitality staff showed however a concerning lack of trust in contactless tipping in the hospitality industry with the majority of staff (84%) worrying they are not getting their fair share of credit/debit card tips and service charges. In addition, their concerns are likely exacerbated through experiencing malpractice with findings revealing two-thirds (66%) of staff say they have knowingly had tips held back or had deductions taken from their tips, with almost three quarters (74%) of them claiming that they were never told the reasons for this.

It should be a warning sign, and a wake-up call to the hospitality industry that staff are questioning the amount of non-cash tips they are receiving. It suggests a clear lack of transparency and trust in the processes which are currently in place.

Furthermore, 1 in 3 staff said they also see tips held back for reasons such as to cover the cost of breakages, to cover tax, to go towards basic staff salaries and to go towards staff uniforms. It’s clear that some businesses are using non-cash tips and service charges as a way to fund basic staff remuneration rather than in addition to their base. The majority of customers agree that it’s unfair that a business can keep a percentage of non-cash tips for any reason.

Transparent tipping can attract customer footfall too

In fact, providing fairer tips could also improve footfall for businesses with 1 in 2 customers being more likely to visit a venue if they knew ‘non-cash’ tips were being shared fairly. This rises to as high as 63% for Gen Z and 60% for Millennial customers.

There is a clear need, in the current climate, to make a career in hospitality an attractive proposition. We know the influence that high skilled and highly motivated staff can have on the customer experience. Great service is a key factor that differentiates a night out from a night in and is a key driver of venue choice.

Effort and contribution should equal reward. There shouldn’t be any mystery around how non-cash tips get distributed amongst staff members. A lack of transparency can create a lack of trust. A lack of trust can impact on both staff happiness and staff productivity. It can ultimately end up in a situation whereby tips, which should be a motivator, end up as a demotivator to staff performance.

Transparency is a Hospitality industry problem

I recently chatted to James Brown, founder of TipJar, about some of the implications of this research and he stressed how the modern employee wants transparency and fairness (that goes for the modern customer too by the way!) He thinks the industry doesn’t have a problem with tipping, but a problem with transparency which is influencing where people are choosing to work and whether employees are choosing to stay. (You can watch the chat in full here.)

The industry needs to ask itself: “Are we doing the right thing by our team?” “Are we doing that in a transparent way?” AND- it may sound mercenary, but- “Are we telling our customers that we’re doing the right thing?”

The research has shown strong sentiments that a fairer, more transparent tipping process will not only alleviate feelings of mistrust but improve satisfaction and retention for staff and can also drive footfall from customers too.”

You can access the full research whitepaper– A Fair Share- here.

Blake Gladman

Hi, I'm Blake, Strategy & Insight Director at KAM. I look after all our research products and manage the collection and delivery of insight throughout KAM. I love long runs and good food (the perfect life balance).