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Tipping at restaurants decreased for the first time since 2020

Tipping 20 percent at a table-service restaurant is still the norm in the United States, according to most etiquette experts — diners disagree.

After remaining stable for years, tipping at full-service restaurants fell to 19.4% in the second quarter of 2023, according to the latest restaurant trends report from online dining platform Toast, reaching the highest average lowest since the start of the Covid-19 pandemic.

“Tipping fatigue” is largely to blame, according to the report.

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“During Covid, everyone was feeling generous,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to make cashless tipping easier.

“The problem is that it reached a new standard that we couldn’t really live with,” he added, particularly regarding tipping prompts at more establishments, a trend also called “tip flow.”

With more tipping opportunities and predetermined point-of-sale options that can vary between 15% and 35% for each transaction, tipping has become less of a reward for good service, he said.

Today, consumers are reacting.

Inflation and surcharges weigh on diners

According to a recent Bankrate report, two-thirds of Americans have a negative view of tipping, especially when it comes to contactless and digital payment prompts.

Rising prices due to persistent inflation have also left more consumers feeling cash-strapped.

Additionally, according to Toast, the growing reliance on supplements has played a role. Restaurant employee health insurance costs, credit card transactions and even tap water make diners want to leave less on the total bill, Plam said. “They don’t need to tip that much if they cover health care,” he said. “It’s quick math.”

Fewer consumers these days also say they “always” tip when dining out compared to last year, according to Bankrate, or for other services, such as ride-sharing services, haircuts, food delivery, housekeeping and home repairs.

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However, as transactions become increasingly cashless, it is essential to have a method to tip service sector workers who earn minimum wage or less than minimum wage, Plam added .

Under federal law, employers can pay workers as little as $2.13 an hour — far less than the minimum wage — if the tips they receive bring them up to a base wage. Some states are now raising the minimum hourly wage for tipped employees or have eliminated tipping altogether.

For restaurant workers, tipping can increase wages by about 90%, according to data provided to CNBC by payroll platform Gusto.

Still, tips are down slightly from a year ago, Gusto also found.

“What we’re seeing is a stabilization at a lower level following the post-pandemic surge,” said Luke Pardue, an economist at Gusto.

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