A look in an encyclopaedia – in this case Wikipedia – provides the following definition of the term: „A tip ... is in the economy one through the guest or customers about the invoice amount additional voluntary payment, which provides for a special quality of service should be rewarded.“
For decades, rounding up was the norm. It was unfortunate for the waiter if the bill ended in .80, as they might only receive 20 pfennigs, or 20 pence today. In some industries, such as the restaurant trade, it was long customary for service staff to receive a low basic salary, as they could expect to receive tips on top of this. These tips were always tax-free, as their actual amount could not be verified. Cash payments made this possible.
Cashless payments have been gaining ground for a few years now. Debit cards, smartphones, smartwatches – the payment options in the modern world are more diverse than ever. And just take a trip to the Netherlands! There, cash payments are already the absolute exception in most supermarkets, restaurants and petrol stations – and in some cases, they are no longer possible at all. Good old cash is no longer wanted. Not to mention the fact that 500, 200 and „copper coins“ are no longer accepted.
What impact does this have on service charges, as tips used to be called? Either there are no more tips, or the extra payment is already preset at the payment terminal. The guest or customer can choose between 5%, 10% or 15%, for example. This has nothing to do with the previous rounding up, as the previous side effect of receiving less change when paying is no longer applicable. The payment service provider does not care which odd amounts are debited from the payer's account.
But who actually benefits from the digital „tip“ when cashless payments are made? Does it really go to the waiter? Or does it remain with the business owner, to whom the cashless payment is credited? Or is it divided among the entire staff? In any case, the actual amount that the waiter, hairdresser or taxi driver actually receives is disclosed.
If cashless tips no longer reach waiters and waitresses, what impact will this have on the low-wage sector? Could this be one reason why catering establishments are now finding it difficult to recruit service staff?
You certainly can't generalise. Every company will handle this differently. Entrepreneurs who value satisfied employees will treat them fairly and pay them what they are entitled to.
Our little example should illustrate that digitalisation has a much greater impact on whether and how an employee receives the extra money intended for their friendliness. It shows that even mundane everyday processes should be re-examined. Do you really have to pay for a coffee with a card? Or might it make sense to have a few extra pounds in your wallet? In cash, of course.
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