Tipping is on the tip of everyone’s tongue these days. For one, the term “tipflation” has been coined to describe disdain at the rising cost of living, including increased social pressure to tip.
Likewise, President-elect Donald Trump said earlier this year that he plans to end taxes on tips — a stance Kamala Harris also adopted. But where does the rest of America stand when it comes to this aspect of compensation? How does this affect employers?
The customer experience
The majority of people in the U.S. feel “uneasy” or “uncomfortable” about the number of businesses requesting tips, per a Paylocity study done in partnership with The Harris Poll.
Notably, there is a slight age difference in sentiments around tipping. Baby boomers tend to be more uncomfortable than Generation Z; compare 74% to 66%, respectively. Overall, consumers feel like tipping should be “reserved for specific businesses,” with baby boomers agreeing more so (79%) than Gen Zers (62%).
Restructuring pay may be the best practice
Reading the report, employers can do more than just learn that consumers are annoyed with tipping culture.
“The growing discomfort with tipping suggests a need for businesses to reconsider their tipping policies,” Paylocity researchers said. “Employers might explore alternative compensation models that reduce reliance on tips.”
Moreover, 83% of tipped workers said they would prefer a higher wage without tips, rather than a lower base pay supplemented by tips, Paylocity found.
The employer branding piece
Paylocity researchers noted that ensuring fair wages is crucial for both employee experience and “public perception.”
Even though the majority of respondents were against the current tipping culture, most people are also against paying tipped workers less: 61% opposed paying tipped employees less, with 28% in strong opposition.
Naturally, front-line workers agreed: 58% opposed and 25% strongly opposed paying tipped workers less.
Looking ahead to the future of tipping
During a June 2024 rally in Las Vegas — a city where the hospitality industry is king — Trump said ending taxes on tips would be “the first thing” he did if re-elected.
He noted that tip taxation had been “a point of contention for years and years and years,” and highlighted hotel and restaurant workers in particular.
Ultimately, the decision rests with Congress. Currently, workers report their tips to the IRS, which in turn sees this earned money as taxable income.
If Republicans take control of both the House and Senate — which the party has a strong chance of doing so, as of Thursday afternoon — Trump will have a good opportunity to put the policy into action.
Given that Harris has also embraced the policy during her campaign, Trump may even have bipartisan support.
