gratuity


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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 ?
The change in the law allows Sailors to designate their gratuity in 10 percent increments to more than one beneficiary," said John Courtney, Pay, Personnel and Benefits section head, Bureau of Naval Personnel.
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I would like to know if the gratuity paid to an expat at the end of service, is based on basic or gross salary.
19) Again, the crime applies to both sides of the transaction, and those who pay the gratuity are equally guilty.
MANY British travellers need tips on correct gratuity levels and etiquette abroad, it was revealed today.
However, I believe the vast majority of the public easily recognizes the dissimilarity between donating for a lifesaving device and a gratuity given with the express purpose of receiving a reward or payback.
Primarily written for service workers in the restaurant and hotel industries, this guide explores the psychology behind giving a server a monetary gratuity, and offers advice on increasing tips and reporting tip income to the IRS.
This conception entails that it is ethically wrong for a person to intentionally offer the police gratuities in order to get either enhanced service in the form of their increased presence or a pass on minor violations that might otherwise be enforced, such as not ticketing the double-parked customers of the store that routinely offers the gratuity.
The criminal illegal gratuity statute is violated when someone directly or indirectly gives, offers, or promises anything of value to a public official for or because of any official act.
Under the auspices of the Uganda Army Service Men Development Association (TUASMDA), 45,000 former soldiers have sued President Yoweri Museveni's government for salary arrears, allowances, gratuity, pensions and damages, spanning a period of over 23 years of service.