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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.


Labor Department; Independent Contractor.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
On Tuesday, some former Ward Reps accused the clerk of subjecting them to unnecessary suffering due to failure to account for their gratuities.
(2) I argue that the use of gratuities is a win-win-win strategy for restaurant owners, customers, and high-quality employees.
This move has come in the wake of court decisions--chief among them the Supreme Court's 1999 decision in the Sun-Diamond case (6)--that have narrowed the scope of the federal bribery and gratuities law and made prosecutions under that statute more difficult.
On the other hand, a blanket policy prohibiting gratuities can have the unintended effect of damaging public relations.
We should all ask the purser to remove these charges from our shipboard accounts, explaining that we prefer to give our own gratuities. In this way, we will know that all monies we give will go to the parties that gave us service and whomever we deem necessary, and that nothing will be skimmed off of their hard-earned tips.
The complete guide to tips & gratuities; a guide for employees who earn tips & employers who manage tipped employees and their accountants.
One view about police gratuities that has acquired the status of ethical dogma is that their acceptance violates policing's "democratic ethos." This position was first expressed in 1985 by Michael Feldberg, (1) and has become one of the least-contested arguments against police gratuities.
The rules governing these issues include criminal provisions of bribery and illegal gratuities, applicable Federal Acquisition Regulation (FAR) provisions, and government ethics regulations.
According to The Associated Press, both men have pleaded innocent to one count each of conspiracy to offer illegal gratuities to a public official and paying an illegal gratuity.
"Key items to look for are whether or not gratuities are included with your drinks or meals, are you limited to buffets or ordering only from certain restaurants on the resort, or are motorized or nonmotorized sports included," says Dana Taub, a travel consultant for All Inclusive Vacations in Grand Terrace, California.
However, by getting itself declared private, the BSA has defeated its rationale for receiving public support and government gratuities. With this Supreme Court ruling, no longer will it be legitimate for the BSA to receive money from United Way (UW) unallocated funds, go into public schools to recruit, or be given military and other government gratuities.
Retired civil servants in Osun, under the aegis of Forum of 2011/2012 Pensioners on Tuesday protested against the failure of the state government to pay 15 months backlog of pension and gratuities.