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Monday, March 21, 2011

Why you should tip your waiter with cash

Want to give the most generous gratuities for hardworking waitstaff or servers? Bypass the tip line on a credit card receipt -- and leave cash instead.

Even when you tip well on a credit card, it's difficult to know whether your entire gratuity will end up in your server's bank account. That's mainly because policies can differ among various restaurants, hotels and other establishments where employees earn tip income. Those policies may reduce tip amounts or slow their payout. For example, servers' credit card gratuities may be reduced to offset the cost of interchange fees the restaurant pays to process credit transactions. So what's a concerned patron to do? When it comes to choosing whether to tip via cash or card, service industry professionals say that you'll make you waiter or waitress happy by leaving your tips in paper bills.


"The benefit to a server who gets paid in cash is they know what they're walking home with," says Brian Connors, an instructor with The Hospitality College at the Johnson & Wales University in North Miami, Fla.

Cash vs. Credit

Some servers acknowledge they are happy to be tipped with either cash or credit. "For the most part, it doesn't matter," says David Herron, a waiter in Dallas. "Generally, I still leave work that night with the cash no matter how guests leave their tip." But tipping in cash still offers certain advantages:

Saves time: Receiving cash gratuities simplifies things for your server. "Cash tips do make your shift a bit easier by providing you with your own personal bank to make change from during your shift," says Herron. "This saves you valuable time when there isn't a manager, bartender or other server with cash on hand to give you change that a guest needs for whatever reason."

Gets them home earlier: Waiters who get paid in cash during their shift may hang onto the money -- which includes the cost of food and beverages, as well as their tips -- until the end of the night. Then they turn over the restaurant's portion, keep the tips for themselves and leave whenever they're ready. "With credit card tips, you have to wait for a manager to pay you before you can leave. Sometimes this happens immediately. A lot of times, you have to wait," Herron says.

"Saves" taxes: Getting paid in cash can also help workers avoid the watchful eyes of the Internal Revenue Service, which requires restaurant workers to claim all tip income -- both from credit cards and cash. "In essence, receiving tips in cash increases the waitstaff's opportunity for unreported income," says Robert Ricketts, who holds an endowed chair in taxation at Texas Tech University. "Tips received on credit cards are documented and presumably compiled by management," he says.

This is a difficult subject for many experts and industry insiders, however. "Long ago, I used to always leave cash tips out of that same sense of sisterly love -- not so much to hide the tips from the restaurant as from the IRS," says personal finance expert Liz Weston, herself a former restaurant employee.


Weston now takes a different view of this approach. "A lot of things changed, including the IRS rules on tip income (which got tougher) and my own attitude, which became: 'I really shouldn't help people evade taxes,'" she says via e-mail.

Of course, tipping on plastic does offer benefits to diners. First, there's the ease of use. "I think the main advantage of including the tip on the card is simple convenience. Some of us don't carry much cash anymore," says Weston. Tipping with a card helps when tracking spending, which can be especially beneficial for business travelers who need to submit expense reports. Meanwhile, should any disputes arise -- like an "over-entertained" (read: intoxicated) diner mistakenly leaving an overly generous tip -- credit card receipts can help to resolve any problems. "Some restaurants have rooms and rooms of guest receipts. In case there is a discrepancy, they have it on file for legal purposes," says Connors.

When in Doubt, Just Tip Well

In the end, experts say that rather than worrying about whether gratuities should always be left in cash or on a credit card, simply resolve to tip generously. "The servers aren't paid a living wage without tips," says Dan Post Senning of etiquette expertise company the Emily Post Institute. Even cash gratuities may not mean the server is going home with that money in their wallet. A waiter's tip may be divvied up among other restaurant workers -- such as busboys, food runners and sommeliers -- who make the waiter's job easier. At other establishments, all tips may be pooled for the entire staff before being divided among all the employees.


There are plenty of reasons to tip well, but what about when your experience isn't so good? Regardless, Senning says that diners shouldn't leave a tip that's less than 15 percent of the total bill. If a poor experience has you considering a tip below that amount, "you really should be talking to the manager," he says. Rather than penalizing your server, an off night for the restaurant may be to blame.

To make sure interchange fees aren't reducing your credit card gratuities to below 15 percent -- since restaurant and hotel policies vary -- Senning recommends leaving a tip that's no lower than 17 or 18 percent. You can also calculate your tip based on the total bill including tax, rather than the pre-tax amount. "That's another way you can indicate the service has been good, and you appreciate it by bumping up the tip," he says.

Just remember that when it comes to servers, they rely on your tips to earn a living. "The mainstay of income is all that gratuity," says Johnson & Wales instructor Connors.

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