gratuity


Also found in: Dictionary, Thesaurus, Medical, Financial, Encyclopedia, Wikipedia.

Gratuity

Money, also known as a tip, given to one who provides services and added to the cost of the service provided, generally as a reward for the service provided and as a supplement to the service provider's income.

Legend suggests that the term "tip" originated from an innkeeper's sign, "To Insure Promptness." Traditionally, patrons gave gratuity to those providing services in order to ensure faster service. Gratuity has always been defined by local custom and etiquette, never by law. Individuals who work for gratuity include those who provide a wide variety of services, including, for example, waiters and waitresses, bartenders, hotel employees, and cab drivers.

Gratuity is customarily designed to ensure that patrons receive the best service possible. The custom allows service providers to be rewarded for providing good service and lets patrons penalize those who provide poor service. The amount of gratuity depends upon the type of service, though tips are usually determined by the total cost of service provided. Proper etiquette suggests that patrons should tip between ten to twenty percent of the total bill. Without gratuity, service providers may have no incentive to provide a higher level of service than necessary.

The system of tipping has been the subject of extensive commentary and debate. For example, eleanor roosevelt suggested to those Americans traveling in foreign lands, "a fair tip, or one a little on the generous side, will leave a pleasant feeling and respect for you in the one who receives it. A lavish one will create a secret disrespect and add to the reputation Americans have for trying to buy their way into everything." Scholars have focused their attention on many aspects of tipping, including the satisfaction of the patron when he or she leaves a tip for the services provided.

Tips and other forms of gratuity constitute taxable income and must be reported by those who receive them. Although the current federal Minimum Wage for most employees is $5.15 per hour, this number is reduced to $2.13 per hour for most tipped employees. Since these tipped employees generally receive more than $3 per hour in compensation from gratuity, they seldom receive less than the minimum wage paid to other types of employees. However, if the combined amount of tips and wages comes to less than $5.15 per hour, the employer is required to make up the difference under regulations established by the U.S. Labor Department. Employees must claim the amount of tips they receive to the employer and must report these amounts when they file their tax returns.

Patrons have, on occasion, brought suit over the practices of service providers of adding gratuity to bills. For example, in Searle v. Wyndham International, Inc., 126 Cal. Rptr. 2d 231 (Cal. App. 2002), patrons of a hotel ordered room service, which included taxes, a seventeen percent service charge, and a room delivery charge. The bill also provided a line whereby the patrons could add gratuity to the bill, even though the service charge was gratuity paid to the server. The patrons sued the hotel, claiming that the practice was deceptive because it did not indicate that the service charge constituted gratuity and that the service charge constituted obligatory gratuity, which the patrons claimed should be voluntary. The court held that the practice was neither deceptive nor fraudulent, holding in favor of the hotel.

Further readings

Morgan, Daniel L., and Yale F. Goldberg. 1990. Employees and Independent Contractors. Chicago, IL: Commerce Clearing House.

Cross-references

Labor Department; Independent Contractor.

gratuity

(Bribe), noun corrupting gift, corruption, graft, hush money, illegal gain, influence by a gift, jobbery, kickback, price, price of corruption, protection, rakeoff, sop, subornation
Associated concepts: bribe receiving, emolument, illegal gratuity, official misconduct, tampering with a witness

gratuity

(Present), noun award, benefaction, bonus, charity, contribution, dispensation, dole, donative, extra, favor, gift, grant, handout, offering, perquisite, premium, presentation, reward, tip, unearned increment
See also: benefit, bonus, bounty, consideration, contribution, dedication, donation, gift, grant, honorarium, hush money, largess, payment, perquisite, present, recompense, remittance, reward
References in periodicals archive ?
Backing Out Both the Sales Tax and Gratuity or All-Inclusive Pricing
If this is the case, there is no immediate ethical difference between tasty food and food given as a gratuity, because they both work against the declared end of a need-based distribution.
Mr Aragbaiye said members of the union should desist from colluding with serving officers of the government who are extorting money from other Pensioners for the purpose of facilitating payment of their gratuity, saying that the state government would no longer tolerate such corruption in the system.
Matter regarding embezzlement of gratuity and provident funds of retired workers by chairman, officers referred to NAB
The IRR features benefits such as: lifetime monthly gratuity; precedence in employment in government agencies; priority in the approval of an awardee's housing application under existing housing programs of the government; priority in the acquisition of public lands; privilege of obtaining loans in an aggregate amount not exceeding P500,000 from government-owned or controlled financial institutions without having to put up any collateral or constitute any pledge or mortgage to secure the payment of the loan; 20 percent discount from various establishments and services; free medical and dental services and consultation in hospital and clinics anywhere in the country; and exemption from the payment of tuition and matriculation fees.
Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
The UAE Government's official portal states that in a limited contract, an employee that has spent one year or more in continuous service shall be entitled to an end of service gratuity upon the termination of their service.
However, there are some instances when the gratuity could be withheld, with the most common reason being some form of breach of contract.
A West Midlands Police force policy document states that "a record must be made of any offer, provision or refusal, in the Gifts, Gratuities and Hospitality register," while also noting that "the general principle governing the offer of any gift, gratuity or hospitality is that it will be declined.
The Supreme Court (SC) has ordered the release of P23 million in retirement gratuity differentials for 28 retired justices of the Court of Appeals (CA).
Summary: Mumbai/New Delhi [India], July 1 (ANI): Cash-strapped national carrier Air India has doubled the gratuity ceiling amount of its employees from Rs.10 lakhs to Rs.
A recent Employment Court decision pondered the meaning of retirement, in relation to a district health board's retirement gratuity provisions.