Is tipping getting out of hand? Here are some lessons from other countries

In Canada, tipping has long been ingrained in the fabric of our dining and service experiences. For many customers, it’s a simple way to express satisfaction and give service providers a little something extra.

However, a number of Canadians find themselves being asked for more money as requests for gratuities extend to an increasing number of services. As a result, some may question whether this practice has gone too far, becoming more of a social obligation than a reward for good service.

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Below, I’ll offer a bit of background on Canada’s tipping culture, examine current practices in other countries, and discuss some noteworthy alternatives to our current tipping model.

CANADA'S TIPPING CULTURE

In Canada, tipping is often considered more than just a courtesy. In many cities and establishments, it’s become a social norm that can supplement the incomes of service workers. In some provinces, such as Quebec, the minimum wage for tip-earners is lower than their counterparts who do not earn tips. The minimum wage for employees who receive gratuities is $12.20 per hour, while workers who do not receive tips must make at least $15.25 per hour.

In restaurants, it is customary to tip between 15 and 20 per cent of your pre-tax bill, depending on the quality of service. Some customers have noted that even 15 per cent may seem rude to workers, with many tipping prompts starting at 18 per cent and running as high as 30 per cent.

Dining aside, tipping extends to various service industries, such as:

• Hairstyling and beauty
• Taxis and transportation
• Hospitality
• Tattoos and piercing

ARE TOO MANY PLACES REQUESTING TIPS NOW?

After the closures of restaurants and other public spaces during the COVID-19 pandemic, a survey conducted by Restaurants Canada in April 2022 found that nearly half of Canadians were tipping a higher percentage of their bill when dining at restaurants in person, compared to before the pandemic. Based on the survey, they were likely doing this out of sympathy and excitement over the return of public dining.

Since then, inflation has risen drastically in Canada. Although the current rate sits at four per cent, it remains higher than the two per cent target set by the Bank of Canada. Experts say the high cost of living has likely contributed to this increase in requests for tips, or “tip-flation.”

Tipping has become even more prevalent as an increasing number of merchants implement automated tip prompts into their payment processors.

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From small cafes to fast-food restaurants, many point-of-sale systems feature an all-too-obvious tip prompt, encouraging the customer to leave an additional sum of money as part of their card payment.

Unlike traditional tipping, where gratuity is left after the service is provided, these digital systems usually request tips beforehand and force customers to decide how much money to give while in clear view of the cashier, and everybody in line behind them. This can leave some consumers feeling pressured to tip, even when they otherwise wouldn’t.

Based on a survey conducted by the Angus Reid Institute earlier this year, about four in five Canadians say too many places are asking for tips, while few believe that customer service has improved.

TIPPING CULTURE IN OTHER COUNTRIES

As tipping becomes increasingly popular in more industries, this is prompting a national conversation about its merits, drawbacks, and the potential for different compensation models.

Here are some alternative tipping practices I’ve experienced in my travels.

1. Round the bill up in Germany

In Germany, tipping is generally not considered mandatory. However, it is customary to round up the total bill to the nearest whole euro, depending on the quality of the service and your level of satisfaction.

For example, if your restaurant bill is 23.50 euros, you might give 25 euros when you pay, including an additional 1.50 euros.

Unlike in Canada, where tips are calculated as a percentage of the bill before tax, the German system is less rigid and more discretionary. Service charges are often included in menu prices at restaurants, for example, ensuring that service providers receive a fair wage. So tipping is genuinely considered a bonus or a thank you gesture.

These tips are usually given directly to the service provider instead of being left on the table. You can either mention the rounded-up total while paying, or hand over the cash and say, "Stimmt so," which translates to, "That's fine," indicating you don't need change.

Overall, this system can make the tipping experience less stressful for both patrons and staff members.

2. Service charges included in France

In France, tipping is governed by a "service compris" or "service included" model. This means that service charges are already incorporated into the prices displayed on menus in restaurants, for example, and therefore, tipping is not obligatory.

A 15 per cent service charge is automatically added to the bill in most restaurants, bars, and cafes. This does not appear as an extra fee – instead, it’s included in the price for each item on the menu. Similar to Germany, customers may leave a small amount of change as a tip or round up the total bill to show their appreciation.

This helps provide a living wage for service staff while relieving customers of any pressure to tip for the services they receive.

It appears as though an increasing number of Canadians are leaning toward a “service included” tipping model, similar to France. According to the previously mentioned Angus Reid survey, 59 per cent of participants said they would support this model, compared to just 40 per cent who expressed their support in 2016.

3. Tipping may be ‘rude’ in Japan and South Korea

Tipping culture in Japan and South Korea differs significantly from etiquette in North America and Europe. In these East Asian countries, tipping is uncommon and can even be considered impolite or disrespectful in some circumstances.

Offering a tip can create an awkward situation where the server feels compelled to decline the extra money, leading to discomfort on both sides. The act could be interpreted as questioning the value of the service provided or suggesting that the worker is not earning a sufficient wage.

In Japan and South Korea, the lack of tipping reflects different social norms and expectations about an employer's responsibility to adequately compensate workers. The focus is on delivering the highest level of service as part of the job, instead of improving customer service in order to earn extra money.

That said, tipping is more common in international hotels and resorts catering to North American tourists.

HOW CANADA CAN LEARN FROM OTHER COUNTRIES

To recap, European countries such as France utilize what’s called a “service included” model, through which an additional service charge is automatically included in the customer’s bill.

Meanwhile, East Asian countries such as Japan have adopted a “living wage” model, through which staff members are expected to be compensated by their employers for the work they offer.

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Both models stand in stark contrast to Canada’s discretionary, percentage-based tipping culture, reducing the burden of social obligation that is often placed on customers.

But more Canadians appear to be leaning toward a “service included” tipping model, and an increasing number of restaurants are becoming tip-free, indicating that this cultural trend may become the new normal.

With files from CTVNews.ca writer Megan DeLaire

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.