Tips on gratuity in restaurants and other businesses

Running a fair tipping system is challenging. We chatted to merchants about how they manage tipping in restaurants and other businesses.
An image for an article about tipping in restaurants.

Tipping in the hospitality industry is a sensitive topic – especially tipping in restaurants. Because our minimum wage is one of the worst in the world, a lot of South Africans rely on tips to make up a significant portion of their income.

On average, Yoco merchants who use the tipping feature process 2 500 transactions with tips each month. More than 14 900 Yoco merchants have enabled the tipping feature, to help their staff accept tips. While the amounts vary between merchants using the tipping function, on average merchants process more than R1 300 worth of tips per month. Without any specific laws governing gratuity in South Africa, it is sometimes difficult to decide on the best way to go about managing tipping in restaurants or other businesses.

This article will help you:

  • Gain clarity on laws around tipping in South Africa.
  • Learn best practice techniques for managing tips in your hospitality business.
  • Learn how Yoco can help manage your tipping process.

We investigated common tipping practices by visiting some of Yoco’s top tipped merchants. The owners and managers we spoke to all shared a common thought: “Your waitrons are the face of your business. They serve your customers, display your product and look after your business. Treat them well and a happy staff member will yield happy customers and grow your business faster than you may think.”

If you develop your tipping process with that sentiment in mind, you’re on the right track. Here are a few tips and tricks to make sure you manage your tips in the most logical way.

Tip one: Does it make sense to deduct transaction costs from you waitron’s tips?

A common practice is deducting a small amount off a waiter’s tip for transaction fees charged by your payments partner.

To understand the legal framework around gratuity in South Africa, we spoke with Candace Bachmann from Justine Del Monte & Associates Inc, a firm of Cape Town-based attorneys and consultants specialising in Employment Law and Industrial Relations. Candace notes, “Even though there is no specific legislation or legal precedent, practically the employer would have to make card facilities available for customers to make payment through, even if there is no tip for the waitron. In such an instance the waitron should not be responsible for part payment of a facility the employer should have in place in any event.”

It is true that you are processing a higher value because the tip is also put through on the card machine, but the percentage that the waiter is responsible for is so small that we believe the best practice is to take this cost on the business. Take a look at the calculation. 

If people generally tip your staff 10% of the total bill, then only 10% of your transaction fee is caused by people tipping your staff.

Cost = R100
Total paid = R110
Tip amount = R10
If transaction fee is 3.39% (maximum Yoco fee inclusive of VAT) then: 
Total transaction fee = R3.73
Transaction for tip = R0.40 (10% of your transaction fee)

You are the owner, and in the end it’s your decision to decide whether to take this amount off of your staff’s tips. So, if you want to take off the transaction fee that staff tips cause, then to do it fairly you have to: know the percentage your staff is normally tipped, know your transaction fee cost to your business, take the tipping percentage off your transaction fee percentage, and then split that amount across all staff members who earned tips.

A lot of admin for at most R0.40 of a R110 bill! But it’s for you to decide if that’s something that you want to go through.

 

We asked Kaylee Morick, owner of Eagles’ Nest Wines (Yoco Merchant #46 643) in Constantia, what she thought of this tipping in restaurants and how she manages the transaction costs in her business. She told us that she doesn’t believe her staff should bear the cost of her business accepting card payments. She tracks each of her staff’s tips and pays out their full tip amount at the end of each month along with their salary.

Tip Two: Should your staff be sharing tips?

Considering this section of the article takes me back to The Dog’s Bollocks (Yoco Merchant #60), a restaurant that challenges your assumptions about tipping in restaurants and the food business in every way. The size of the wait staff is very small, only two per shift, and they are helped by runners and bar staff. 

The runners don’t earn tips, and the bar staff earn very few tips because most drinks are ordered from the table. The two waitresses earn most of the tips for the night, raking in a small treasure, while the bar, and runners walk away with significantly less tips for the night. 

Eugene, the manager at The Dog’s Bollocks, therefore implements a rule where the waitresses give a portion of their earnings to the rest of the staff who helped provide the service.

He explains: 
“There are many different staff members that contribute to the service a customer receives; the kitchen and bar that makes your food and drink, the waiters that serve it, the runners that take your dishes away and the kitchen staff that clean it. But when your bill comes at the end of the meal, only the waitress gets tipped. That doesn’t seem fair.” 

 

Often restaurant owners will enforce a rule where a certain percentage of a waiter’s tip will go towards the bar, kitchen staff or runners. This is something that each owner needs to work out when it comes to tipping in restaurants based on what makes the most sense.

 

Tip Three: How often should you pay out tips?

Cash tips are easy, because the cash is available to pay your staff members immediately. Most owners that we spoke to said that their staff prefer to receive cash tips daily because it helps fund their transport to and from work.

Paying out tips made by card is a little more complicated. How regularly you choose to pay your staff tips out depends on you and your staff members. Some owners prefer to pay tips out with their staff’s salaries, once a month. Others say that their staff prefer to be paid their tip once a week and their salaries at the end of the month. Some owners choose to pay out daily shift fees and tips. In the end, it’s your decision, and your staff will be able to help you make that choice.

It is important to make sure that your staff understand how your tipping process works and their rights as employees. On that note, Candace’s last really important piece of advice to consider is this: “The tips received are not payment from the employer so they have no right to regulate it. However, when the employee signs on to work as a waitron and certain rules/regulations are imposed on them regarding their tips, they tacitly accept such regulations by not challenging the employer.”

How Yoco can help with tipping

If you are struggling to keep up with the admin involved with tipping, you can use the tipping feature in your portal to help you keep track. Here’s how.

Step 1: To turn on tipping open your Yoco Business Portal
Step 2: Click Business Settings in the menu on the left side of the screen. 
Step 3: Select Point Of Sale in the drop down menu. 
Step 4: In the Tips section you can adjust your tipping features to suit your business.

When you process a card payment, we will ask how much you want to charge to that card. This is the easiest way to accept tips on card transactions. This means that when you enter the total amount you want to charge to the card, it will record any additional amount added as tip.

This allows you to manually add a percent or amount tip to a bill before the customer makes their payment. This means you can set the tip amount on behalf of the customer.

This will ask your customers if they would like to add a tip to their purchase before they insert their card. This means your customer decides how much they want to tip.

If you want to find out more about the laws around tipping in restaurants and other businesses, here are a few resources:

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