Restaurants and even retail locations are adding an automatic gratuity but enough is enough. Can you refuse to pay automatic gratuities?
If you are considering booking travel or signing up for a new credit card please click here. Both support LiveAndLetsFly.com.
If you haven’t followed us on Facebook or Instagram, add us today.
Autogratuities At Hotels, Taxis, Restaurants
In recent trips to New York and Miami a growing number of restaurants have implemented an auto gratuity on service whether or not it was a service that received traditional tipping. From taxis that already have a percentage selected an offer an additional amount to a restaurant server holding an iPad with a below-average amount for selection, it seems they are everywhere.
What used to be reserved for large parties at restaurants now seems to be everywhere, especially in high tourist areas like Miami’s Brickell neighborhood. For an already nosebleed high two-scoop gelato cone ($13), automatic gratuity charges were pre-selected at 18%. In what seems to be the going rate, a pizza place implemented an automatic gratuity also at the 18% level (a Miami standard) and then asked if I wanted to add 3%, 5% or 10%. I hadn’t known about the autogratuity but was alarmed for the staff when I saw 3% as a first option for a tip. It was only after asking that they revealed 18% was already included and I could add more if I wanted.
Only in the United States could two tips be a thing.
Why Did These Come About?
It seems that during the pandemic the labor market changed and inflation has only further impacted purchasing power, now down around 20% since the start of the pandemic. It’s hard to provide jobs that pay sufficiently and retain talent, elevating earnings anyway businesses can (especially without it coming out of their own pocket) is a worthwhile approach to consider.
Prior to the pandemic, a push for higher federal and state minimum wages brought up the total expected pay for the service industry, but not necessarily the actual pay. For example, 30 states have a higher minimum wage than the federal minimum but for tipped staff, base minimum wages trail significantly behind. For example, Rhode Island has a higher-than-average minimum wage of $14, nearly double the federal minimum, but for tipped staff it’s just 50% higher at $3.89/hour vs $2.13/hr. Washington DC guarantees $17/hour for non-tipped staff with just $8/hour for tipped staff – one of the most progressive in the country. Business owners are still competing against higher wages for their staff, however, so they charge automatic gratuities to ensure compensation is above average.
But one study showed that 32% are tipping more than before the pandemic and an equal portion state they are tipping less though that is linked to the rise of inflation in 2021.
At this point, the practice has gotten completely out of hand. Just yesterday, Gary Leff reported that Detroit Metropolitan Airport is soliciting tips at the water fountain.
Can You Refuse An Automatic Gratuity? Should You?
It’s not just big cities in tourist hubs that add service charges, but it’s where I have personally noticed it most. But what qualifies as a tip vs a mandatory fee? Gratuity by definition is: “something given voluntarily or beyond obligation usually for some service.”
To comply with state laws, a service fee (something you cannot avoid) is different from tipping and automatic gratuities. As such automatic gratuities legality only remains valid if it can be removed by request.
For business owners, they should consider it carefully. I would never revisit an already expensive gelateria (I paid €3 in a touristy area of Rome for the same size cone as the $13 equivalent in Miami – with no tip mandated) that imposes an 18% surcharge on the product. I would choose another place. And I’m among the majority in my disgust for the auto-grat:
“About seven-in-ten adults (72%) say they oppose businesses including automatic service charges or tips on customers’ bills, regardless of group size – including half who strongly oppose the practice. Only 10% favor such charges.” – Pew Research
Can you refuse an automatic gratuity? Yes, absolutely. Should you? It really depends on what it is. I spent almost a decade in the service industry, my first job was serving tables. Anyone who has worked in the industry will tell you that guest tip amounts vary widely with some tipping very little, and others very generous. For former industry alumni, generosity is typically the case. My personal automatic gratuity starts at 20%, in part because it’s easy to calculate and has always been more than fair. After all, as inflation pushes prices up, the tip goes higher too. And I don’t separate off taxes or drinks as tipping etiquette advises, whatever the amount is at the bottom of the bill, 20% is my base line and goes up from there for better-than-average service.
That said, when I see an automatic gratuity, I bristle. I worked hard in that industry to not only do a good job for customers but stand out above my peers. But when someone who really isn’t trying, is forgetful, slow, or busy doing something other than their job, the automatic gratuity insulates this person from the reality that they aren’t working very hard at all.
It also assumes that I won’t tip at or above their automatic amount, so when I see an auto-grat on my bill, I rarely tip above it, even though this is usually below the amount I leave.
At the Hyatt Centric Brickell (review coming), hotel restaurant staff point out the tip line and as I looked (I never used to) then also stated that an included 18% was already on the bill. That feels a little deceptive, much like the server at the pizza place. A simple “a gratuity of 18% is already included but you can change that if you’d like” would probably lead to me altering it more often rather than waiting until I notice it to disclose.
According to an October 2023 New York Post article that found similar behavior in Miami and (at the time) growing in New York added this:
“(NYC restaurant inspections require that such charges must be conspicuously disclosed to consumers before they order.)” – NY Post
While NY restaurant laws don’t apply to Florida, I checked the website for the pizza place I visited. There was no mention anywhere on the menu at all online and because seemingly every restaurant uses QR codes, that’s exactly where such a disclosure should go.
Conclusion
While it’s understandable why restaurants would chance to add the fees, so long as they abide by automatic gratuity laws, I can understand why they add it. However, disclosure is often minimal until the final bill comes if it’s mentioned at all. According to a study above, people who typically tip more than the automatic gratuity do not adjust their tip amount if an amount is already entered. Perhaps more because of traveling and being in touristy areas, it seems like the largest cities in the country have started more or less mandating a specific tip and then asking for more, I am not alone in those situations tipping less. That’s worse for the person receiving the payment, and it makes me less likely to return.
What do you think? Have you noticed automatic gratuities increasing in use when you travel? What’s your approach?
There are several important things to note. First, very few employees. Most coffee shop workers, counter service restaurant employees, and many others aren’t tipped employees under Federal Law. As such, they are making at least minimum wage, not the greatly reduced “tipped wage.” Second, I’ve found that many businesses don’t pass on tips in these cases, as in most states they aren’t required to. The “tip” you’re being prompted by the POS system to add may simply pad the bottom line. Third, people need to recognize that ultimately tipping doesn’t raise take-home pay for workers, it simply shifts the burden of paying them from the employers to the customers. If employers care about how much their employees make, they should pay them more rather than guilt-tripping their customers into tipping more. Widely and generously tipping might feel kind, but it just feeds a broken system that needs reform.
In downtown Miami (Brickell), most food service employees are actually making the lower tipped employee minimum wage, including coffee shops, fast-casual restaurants, and gelato and other ice cream shops. I’ve lived in the area until recently and I’ve worked in the food service industry over there.
How much is the appropriate tip to leave for a pilot on a longhaul flight? If 20% do I calculate this based on the base fare or do I include taxes and fuel surcharge?
@SeanM … +1 . Actually , I have been known to tip FAs a $50. bill when they go above and beyond for my disabled self .
I’ve reduced my tipping levels substantially, when service is basic, as expected, or falls below a standard. Establishments going up to 25% for a tip, and in some cases, 30% is egregious. I don’t tip for coffee or at a bakery. My new standard for “as expected” is 18% and I have absolutely no issues with that.
@lavanderialarry … +1 . I usually have a good variety of cash in small bills , and I can count out the exact amount of the bill , and then add a $1 One Dollar for a tip . Problem solved .
All of the nickel and diming, games and unjustified price increases (30 to 50 percent in some cases) by restaurants have led me to cut eating out substantially. I feel like I have started saving 100’s of dollars a month by eating at home more.
@VineK … +1 . Also , you are eliminating your risk of food contamination by eatjng at home .
Whenever I meet a restaurant owner , I ask him : “When did you actually see your cooks wash their hands ?” The owners never reply .
“Can you refuse to pay automatic gratuities?” Absolutely. I simply do not eat out anymore in the US. Very easy to do. The only time I eat out is if I am on a business trip so I have no option but at home, ZERO! There are great grocery stores and local coops where I can get fresh everything to cook great meals with my family at home. I love to BBQ, have a fantastic Italian pizza oven in my backyard so I buy all my ingredients and make cooking with family a great way to spend time together.
Most restaurants here not only added automatic gratuity of 18%+ but added a mandatory 5% “health&wellness” to help pay for their employees health plan and of course when the bill comes there is an option to still add tips. Oh, and did I tell you about valet parking at the doors for an extra $10-$15? Yes, they block half of the street so you cannot park and have to give your car two them otherwise good luck finding a parking spot. On top of that, prices for the food are absolutely out of control. $65 for a piece of beef? $25 for an individual pizza? $22 for a salad? $12 for a small pastry? No thanks! That is why we go twice a year abroad to places were you can get amazing value for eating out. For this summer, I already have reservations in 18 different restaurants in Italy and France for my family and I can assure you that after having a memorable meal with all courses you can imagine I won’t spend more than €50 per person including wine, desserts, espresso, etc…. I know I will leave the place remembering the great meal and time we had as a family. I keep saying that most Americans do not know the basics of Econ101. Supply and demand works. Just stay home and leave these restaurants empty and you will see changes. Keep going and supporting these practices and they will keep adding more and more. Your choice.
I agree with you Santastico. l love spending as much time as I can overseas, one reason is because not only is the food quality generally better, I also don’t feel like I am getting ripped off. I just came back from 3 weeks in Japan. The average lunch and dinner bills for me were in the US mid $20’s. As soon as get back, I am lucky to have a meal with my wife that is below $50. I was actually shocked that I could eat so cheaply in Japan, It frankly always made me happy when paying the bill to see how cheap it always was compared to the US. I always left the restaurant happy, not just because of the food but because of the cost. I wasn’t staying in the cheap part of Japan either.
@Jacob: go to Italy, Spain, Portugal or Greece. Skip the predictable tourist traps and you will eat and be treated like a king. I spend a lot of my free time planning our family summer vacation and focus on finding amazing restaurants that locals go. Just booked an amazing one where the most expensive dish in the entire menu is €18. The other thing that nobody says here is the quality of the service. In most restaurants in Europe they only serve two turns which means there is no rush to kick you out of the table like they do here in the US. We spend sometimes 3 hours at the table savoring the dishes and not ordering fast so the server can kick you out to serve another table. Owner comes talk to us, shares amazing life stories, brings food for you to try for free, etc… It is an experience vs a business transaction here.
I recently visited the USA for the first time in over a decade and was shocked by some of the prices – $5+ for a takeaway coffee wasn’t unusual (and I don’t buy huge and/or syrupy milk drinks, which presumably cost even more).
The only real full-service restaurant we visited was over $100 per person, and we didn’t even have wine! Everywhere else the service was pretty mediocre and there was an expectation to tip even when ordering at a counter.
Needless to say, I am not in a rush to go back. Never mind Greece, Spain, and Portugal (which do have some amazing restaurants at very fair prices)- even London and Copenhagen are much cheaper, and I only went to Texas [so presumably California and NYC are even more expensive].
I mentioned those countries because they are usually places you can go in summer vacation. But couldn’t agree more about London and even Paris. You can eat amazing quality at great prices when compared to the US.
So agree with you Santastico regarding eating in the US. Plus the quality and quantity of food had declined. Also, don’t forget the 3.5% fee is you pay with a credit card. I’m half Greek so spend a lot of time there and in Europe. Even the grocery store pries are now less than the US. I eat like a king In Europe for what it costs to go to a fast food restaurant here.
It IS astounding. I’m in the Azores right now. My partner and I had three courses and a bottle of wine in what seemed to be the trendiest restaurant in Ponta Delgada. The price: €47.50. Amazing.
There is a very common deceptive practice used in Miami, which is to only provide the summary receipt at the end unless you request an itemized. A lot of people will not know that the bill they are looking at already includes the automatic gratuity, so more than half of the receipts end up with supplemental gratuity in the same size as the automatic gratuity. This is especially egregious at the standard hotel, at some of the bigger bars, and of course many of the clubs.
This tipping problem is out of control. Does wait staff at an expensive restaurant deserve more than a cheaper restaurant since tips are often by percentage.
Thank you for reading my comment. Please select the tip…$1.06, $2.68, $5.82, $17.31
I find that even people working on stores are feeling embarrassed about it. Notice that they don’t even process the payment anymore. You have to do it. You go buy a loaf of bread and the person scans a bar code and turns the display so you finish the transaction. Immediately you are prompted with options from 15%, 18%, 22% and sometimes 30% for tipping. I noticed that the person serving you kind of wonders away so he/she is not looking at you. It is a very awkward situation. I also started paying attention on other customers next to me to see how they react. 95% hit “0% or no tip”. Now there is even worse than that. Some places do not give you an option for a %. They give you straight numbers like $1, $2, $5. Yes, it sounds pretty small right? Well, when you buy a loaf of bread for $5, a simple $2 tip is 40% of the cost of your purchase. But again, most people do not know math so what is the big deal in tipping someone $2? Well, it happens that on your bread purchase you just tipped 40%. Crazy!!!!!
@Santastico … so , best to pay cash for small amounts , no ?
Don’t remember the last time I used cash in the US. I hate having to carry coins. Thus, I always pay with credit cards, just say NO to tipping on those stupid screens.
In the British Virgin Islands, many restaurants add an automatic 15% fee or “tax” (the BVI does not have a tax on food or drink). When you question the servers, nearly all will say it’s not a tip and expect addition gratuity.
The core of the issue is profitability for the business owner: pay as low of a wage as possible, and rely on customers to supplement employees wages.
Case in point: a few years ago, my daughter was hired at a smoothie place that had just opened. After 3 months of lower-than-expected sales, the owner informed all staff that their hourly wages would be reduced, but tipping would be encouraged on both their credit card terminals as well as a tip jar. The owner claimed that the generosity of midwesterners would more than make up the difference.
Unsurprisingly, that did not happen. My daughter quit and there has been a steady turnover of employees ever since.
Business owners: if you want reliable service that encourages customers to return, pay your employees a competitive wage. It’s that simple.
I worked at an ice cream store as a student . The owner said to give customers a larger-than-expected cone or cup. Presto , lines were out the door , and very profitable .
Later , at a book and news store , the owner said to give customers an automatic 10% discount if they asked . Presto , many sales and very profitable .
Smart business owners make their customers feel like they got a good deal, not a bad deal. So few understand this. If a customer does not feel they are getting their money’s worth they won’t come back. The last thing you want is for a customer to think you are either over priced or taking advantage of them.
Look folks, employers are not dumb. They can either pay a competitive wage or pay below competitive and make it up with tipping. The employee does not care about whether customers hate tipping, they only care about the size of their paycheck. Essentially, employers have been unable to keep up with inflation on wages @Kyle Stewart pointed out. Especially during the 2021 and 2022 and service workers aren’t making enough to absorb inflation with some cutbacks in spending like many of the blog readers. The problem here is as Jay pointed out folks don’t want to make up for wages in traditionally non tipped establishments with tipping. So employers are doing the right thing by the their employees by de facto making the gratuity a service charge through automatic tipping. Really, does it matter? If automatic tipping is made illegal or hard to implement through laws, employers will raise prices. Ultimately, if their business model isn’t viable they will go out of business, but it doesn’t matter if what you end up paying is tip or the price of the product.
Oh and Kyle is onto something, the USA is becoming very very expensive to live on. That’s one reason so many USA citizens are leaving the country to live elsewhere. We as a country need to focus on one thing, building more housing to help bring the cost of living down. Which means rolling over NIMBY opposition and approving more and more development until housing prices stabilize. Until we do things will only get worse from a cost of living standpoint.
Similar to @Santastico, I don’t regularly end up in places with gratuities expected outside of business travel. But, I’d rather they just raise the prices. I can’t expense over a certain percent tip. And I prefer to give cash tips especially for smaller amounts (the only time I use cash… I keep an envelope of small bills in my travel bag) as I know then 100% is going to the recipient.
When I was doing contracts for airlines, one of my vendettas was against paying wheelchair assist agents a tip wage. For one, paying a normal wage helped with recruiting/retention. Two it eliminated a lot of customer issues. Used to have wheelchair agents solicit tips in the worst way. In one smaller airport, I requested wheelchair service just to follow up on some complaints our local manager had…. yeah, the wheelchair agent informed me they worked for tips, I said well I don’t have cash, so they wheeled me right over to an ATM and said they’d help me withdraw cash (which was a $20, and they didn’t have change).
How about making it illegal for corporations such as Blackrock and Vanguard to buy up a bunch of single family homes as those corporations usually are able to outbid individuals who wish to buy? That would free up some homes for the market and perhaps result in a correction in housing prices.
It’s time for you all to emulate your European friends and neighbours and stop the whole nonsense of tipping unless there is truly exceptional service. I make a point of never tipping in the US, I may be hated but I refuse to join in this dysfunctional culture. A restaurant is not a low cost airline where you pay for elements of the product separately, you pay for a meal and crucially, the service involved in getting it. The battle if there is one needs to be faught between restaurant owners and employees, leave customers out of it.
@James Harper the way to accomplish what you want is to eliminated the tipped minimum wage and increase minimum wages all around (otherwise tipped employees continue to receive tips like in California and Canada but have to tip out the non tipped employees at a restaurant.
In California, the minimum wage now for tipped employees is $16 per hour. As a result, the percentage I tip is now much lower than before at no more than 10%. The tipping ‘trend’ has gotten out of control and it’s a ‘trend’ I will not join.
(1) I only tip based on the level of service I receive. (2) I always tip in cash directly to the server. (3) Anyplace that automatically tries to make me tip loses my business automatically.
The only thing I dislike more is businesses soliciting clients at checkout for contributions to their select charity. They collect the money, make the donation in their name, get the credit and the tax deduction! I no longer use a local gas station, because even the self serve pumps solicit contributions on screen!
I don’t have any problems making an on-the spot-decision. And as Gary notes, as an alumni, I want to help the working poor. But if service is bad or no service at all, I’ll put it to zero and not tip at all. I’m currently in the EU. And while earlier today I tipped nothing, I just gave a nice American style tip in a cerveseria, though, just because the waiter was really good. And I handed it to him directly to make sure he got it.
Arthur you will have to forgive me, but when I first read “an American style tip” I thought you were giving fashion advice! This is what happens when I don’t sleep.
So just cross it off and put total as original price, and guess what, it’s now ZERO for any tip and no return visit for me.
I lived in downtown Miami (Brickell) from August 2021 to August 2023. I also worked in the service industry at a restaurant in Brickell. Let me try to shed some more light on this.
During the pandemic, tipping for guest-facing positions increased dramatically. The business owners saw this, and of course they are looking for ways to increase their bottom line and pay employees less. The minimum wage in Florida is around $13 right now (it increases by $1 every year until it hits either $15 or $16, can’t remember). The minimum wage for tipped employees is $8.98 (it went up from $7.98 recently, and was $6.98 a year before that). Since the businesses were getting so much in tips, most restaurants (even coffee chains and fast-casual restaurants), changed their base pay for guest-facing employees to be the FL minimum wage for tipped staff.
I worked in a fast-casual restaurant in Brickell, and that place was extremely popular (despite being new), and had a huge lunch crowd. I’d help about 250-300 guests just over the 2-hour peak lunch period. I’d sweat like crazy each shift and I would go home tired and sore every day. The restaurant had amazing tips, so we would get paid an average of $14-15 when we have an okay pay period, $15-$16 when we do good, and sometimes up to $18. But the restaurant only paid us $7.98. The rest came from our guests, who would often come every day, so I of course didn’t expect then to tip a lot every single day (since they all likely have a budget and we’re eating with us because we have good food at a decent price for Brickell). The issue for me was that tips were pooled and split for all of the staff in the front-of-house, which meant that even if I do good, it doesn’t matter unless everyone does good (even that one person who doesn’t want to be there).
And the restaurant made a huge amount of money that they pocketed for corporate. Labor only accounted for about 10-15% of their total daily sales. And they were trying to keep it below 12%, and they would send people home if it was above that! That left us short staffed almost every day, and meant I had to work even harder just to earn $16 an hour. Labor at most restaurants is around 28-33%, and about 20% for fast casual restaurants. The restaurant doesn’t pay sh**.
This is true for most places in Brickell. The pay in Brickell is still slightly better than in other parts of Miami, but for someone who lived in Brickell and knows how much the high dining cost and tips sting, I see both sides to this argument. I still try to tip when I eat out in Brickell though because most places don’t pay their employees enough, so the employees are dependent on customers to make basic income. If tips fall below the FL minimum wage, then the restaurant is supposed to pay the remaining wages until you hit minimum wage. But that means you earn $13 when you were promised at hiring that you make between $16-$21 an hour!
Purely for bare-faced cheek, if any gratuity were included in my bill, I would automatically reduce it to zero.
During my trucking days I shut down at a hotel in Baltimore, Maryland late like after 2300 and the only eating place open with dine in was a sports bar within walking distance. I ordered a burger which was pretty good. The service was average to the best of my recollection. When the bill came an automatic 15 percent tip was included. I was told that was mandatory so I did not tip anything above and beyond that.