Background:

“Tipping” is an additional fee paid for certain types of purchases in some countries. It is especially common in the food service industry in the United States.

In theory, tips are supposed to either go to the worker who provided a certain service, or to go to a “tip pool” where tips are averaged out among workers.

(One popular—but illegal—method of stealing money from employees (“wage theft”) is for management to also take a cut of the tip pool.)

The Issue:

Some companies have figured out a way to (sort of) steal tips in a possibly legal fashion! (See https://www.google.com/search?q=tips+to+driver+stealing+tips for some “tips” about stealing tips!)

Here’s the system: imagine you run a pizza-delivery service in which customers use a phone app to order pizza. Customers pay the 1) cost of the pizza, 2) a 20% delivery fee, and 3) an (optional) tip.

Delivery drivers will need to get paid for deliveries even if customers don’t tip, so the company needs to always pay drivers a fixed “guaranteed” fee.

So if a customer leaves a $0.00 tip, the financial situation is as follows:

• Pizza cost (Customer → Pizza Co.): $40
• Additional fee (Customer → Pizza Co.): $8 (20%)
• Customer’s Tip (Customer → Pizza Co.): $0
• “Guaranteed” payment to delivery driver (Pizza Co. → Delivery Driver): $5
• Result: driver gets $5 ($5 guaranteed payment + $0 tip), and the company gets $3 (the $8 fee minus the $5 guaranteed payment).

Now, suppose that the customer leaves a $6.00 tip instead:

• Pizza cost (Customer → Pizza Co.): $40
• Additional fee (Customer → Pizza Co.): $8 (20%) 
• Customer’s Tip (Customer → Pizza Co.): $6.00
• “Guaranteed” payment to delivery driver (Pizza Co. → Delivery Driver): $5
• The customer expects that the the driver would get $11 ($5 normal fee + $6 tip).
• But actually the first five dollars of the tip are used to replace the “guaranteed” fee, so the driver actually only gets $6 (0 fee + $6 tip). This is only one dollar higher than the “$0.00 tip” situation!

One could argue that the driver technically still received the entire $6.00 tip, but since they got five fewer dollars from the company as a result, it’s basically as if the customer tipped the driver one dollar and tipped the company five dollars. This is probably not what the customer expected!

(As a result of these shenanigans, you’ll sometimes see text on receipts to the effect of “All tips go to workers.” Whether or not that addresses the situation shown above is unclear.)

There was a bit of a scandal when this was initially discovered, so it’s unclear if any companies are still doing this.

Proposal:

Let’s make the tipping situation more clear by adding new tipping categories that definitely 100% do not go to workers.

One could imagine the option of not just tipping the worker, but also specifically tipping a company’s executives, it’s legal team, maybe the landlord who owns the building that the business is in, etc.

See the receipt mockup in Figure 1 for a cafe that has moved to a “no tipping (of workers)” system. Fortunately, you can still tip the owner (Figure 1 “A” indicator) and landlord (Figure 1 “B” indicator)!

Conclusion:

Customers might appreciate being able to “vote with their wallet” by deciding how to allocate their tips!

PROS: Brings transparency to tipping. A customer will no longer need to worry that workers aren’t getting money from tip—now it’s GUARANTEED that they aren’t!

CONS: None

Update Jan 22: Fixed an incorrect number in the first pizza delivery scenario and changed the “pizza cost” to make the math a little more obvious.