Tipping Etiquette: Who should you tip and how much?

December 7, 2010

During the holiday season, the notion of tipping those who provide you service becomes a hot topic. However, it is important to remember that tips are a year-round affair for many. The questions that plague most people are: "Who do I tip?" and "How much do I tip them?"

Fear not, for PayScale is to the rescue. We recently released our 5th annual Tipping Study that answers these questions and then some. In this post, I will highlight interesting results from our study, as well as detail the methodology.

Do you work in a job where tips are commonplace and are wondering how your pay fares? Find out with a free PayScale salary report.

Tipping Study: Methodology and Definitions

Using PayScale’s extensive database, we determine a list of ~100 service jobs where workers receive tips and separate these jobs into three categories according the the frequency of tips reported:

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Very Frequently: Nearly everyone doing the job receives tips regularly as part of their income. Examples include Taxi Drivers and Waiters/Waitresses, both of which are tipped regularly by customers.
Frequently: While tipping is a regular feature of this job for many practitioners, there are a significant number for whom tips are not common. For example, a Restaurant Host/Hostess may often receive tips in a customer’s effort to be seated more quickly or in a better location, but they are not tipped by all or even a majority of customers.
Occasionally: Tipping is sometimes a feature of these jobs, but many practitioners do not receive tips regularly. For example, Makeup Artists who help a bride get ready for her wedding day will often receive a monetary token of gratitude, but Makeup Artists who help models prepare for a photo shoot will not.

Once we have our list of tipped jobs, we determine their median hourly tips. This is the median wages from tips by the hour for workers reporting tips. 50% of the individuals with the job earn less in tips per hour, and 50% earn more.

Note: It is important to remember that tips reported are median tips and that it is possible for people to earn more or less than the stated median depending upon several features such as location of work, type of employer, duties performed, tenure in job, holding a loyal customer base, etc. For example, a Hairdresser working at a discount salon such as Supercuts is likely to earn tips much less than one working at a selective boutique in New York City.

We next calculate the median base hourly pay. For employees holding a job who report tips, this is either the median (50th Percentile) base hourly wage or the median base salary divided by the typical number of hours worked in a year. An example of the latter would be if a worker earns $24,960 in salary and works 2080 hours per year (40 hours a week x 52 weeks a year), then the base hourly pay would be $24,960/2080 = $12.00/hour.

To put the amount of tips received in perspective, we then calculate the percent of total hourly income from tips. This is the ratio of the median hourly tips and the typical total hourly income (which is the sum of median hourly tips and median base hourly pay). For example, if you earn $3.00/hour in tips and $12.00/hour in base hourly pay, then your percentage would be $3/($3+$12)=20%.

For reference, we also define the typical hours of the workers in these jobs and separate them into the following three categories:

Full-time: The typical employee with the given job works at least 35 hours a week.
Part-time: The typical employee with the given job works between 25 and 35 hours a week.
Limited Time: The typical employee works less than 25 hours a week.

Note: A typical workweek can vary within a job. For example, while over half of the Dog Groomers in our system report working more than 36 hours a week, many may still choose to work part-time.

Tipping Study: Interesting Observations

1. On average, we find hourly tips have not changed from last year: Last year, we observed a 5% drop in the average hourly tips across jobs and this year we observed no change from last year. Therefore, on average it appears tipped service jobs have not recovered from the dip caused by the recent recession.

2. Range in tips across the jobs is fairly wide: Gaming Dealers report the largest tips with $12.60/hour, while Swimming Pool & Spa Technicians report the lowest tips at $0.30/hour.

3. Highest Median Hourly Tips: The three jobs with the highest median hourly tips are Gaming Dealers ($12.60), Butlers ($11.40), and Sommeliers ($9.80). Remember that these are just median tips and it is possible for workers in these jobs to receive much higher or much lower tips.

4. For some jobs, tips make the majority of their take home pay: For three jobs, over 50% of their total hourly income comes from tips: Bartenders (56%), Gaming Dealers (66%), and Waiters/Waitresses (69%). Therefore stiffing any of these people on their tips is cutting their pay in half (and then some).

5. The spread in reported tips can be very wide for certain tipped jobs.For example, the bottom 25% of Sommeliers are tipped less than $5.10/hour, while the top 25% are tipped more than $13.50/hour. This results in a spread of about 3x between the 25^th Percentile and 75^th Percentile of tips, which is not uncommon among the tipped jobs: over 80% of the jobs included on the list have a spread of at least 3x.

Jobs which have at least a 7.5x spread include: Baggage Porter or Bellhop, Dining room Attendant, Dog Walker, Doorman, Hotel Floor Manager, Guest Services Representative, Housekeeper/Maid, Makeup Artist, Newspaper Delivery Driver, Parking Attendant, Personal Chef, and Tour Guide.

6. Median Hourly tips fell by a significant amount for Night Club General Managers and Bar Managers: Median hourly tips fell 40% for Night Club Managers and by 16% for Bar Managers. Although tips for Night Club General Managers fell by more over the last year, Bar Managers are hurt more by their decrease as a larger portion of their total income comes from tips (~15% for Night Club Manager vs. ~40% for a Bar Manager).

This decrease could show people are still suffering from the recession and are not feeling ready to party down at Night Clubs and Bars.

7. Traveling for the holidays?Make sure to tip your Chauffeur, Van Driver or Taxi Driver. All of them earn at least 15% of their total income from tips. If you plan on taking a tour while on vacation, don’t forget to tip your Tour Guide; their median hourly tips make up about 20% of their total income.

8. Concerned about your looks?There are many people who can help you look great and are often tipped. These include Makeup Artists, Tattoo Artists, Barbers, Hairdressers, Estheticians, Nail Technicians, and Cosmetologists. For all beauty positions, tips make up to a quarter of their total income.

9. Throwing a holiday party? For entertainment you might want to hire a DJ or Musician/Singer, but don’t forget to tip them for a job well done. Bringing in a catering company? You will need to tip both the Catering Manager as well as the Food Servers. For some of those big parties you may choose to hire a parking attendant. Make sure the party-goers tip them as over 20% of their income comes from tips.

Do you wonder whether you’re being tipped enough in your job? When you want powerful salary data and comparisons customized for your exact position or job offer, be sure to build a complete profile by taking PayScale’s full salary survey.

Regards,

Katie Bardaro
Research Analyst, PayScale, Inc.