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Tip Sheets

Transparency is key in proposed changes to tipping rules

Media Contact

Rebecca Valli

This week, the U.S. Department of Labor proposed changes to the way workplaces can share tips among its workers. The proposal, which would allow sharing the tip pool with employees who do not traditionally receive tips – such as cooks or dish washers, is seen as a way to tackle wage disparities by de-regulating the market.

Associate Professor of Marketing at the Cornell SC Johnson College of Business

Manoj Thomas

Associate Professor of Marketing at the Cornell SC Johnson College of Business

Manoj Thomas, professor of marketing at the Cornell SC Johnson College of Business and an expert in consumer behavior, says that regardless of how restaurants choose to allocate tips, research suggests customers are more likely to tip when management is transparent in how gratuity is shared.

Thomas says:

“Looking at this from a customer’s perspective, I believe that most customers would like to see the tips being equitably shared by the service-facing staff as well as the back-end staff (i.e., chefs).

“I don’t think the customers would want the tip to be pocketed by the management. If the new regulation makes it legal for the employers to pocket the tip, then I think it could adversely affect tipping rates.

“Research in the domain of donations and charitable giving has shown that customers are more generous when the recipient of their donation is clearly identifiable. Lack of identifiability can reduce their willingness to spend money. This stream of research suggests that lack of clarity about how the tip money will be shared could reduce the rate of tipping. To avoid this, it would be important for restaurants to clearly state that the tips will not be pocketed by the management.”

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