The Benefits of Cash Tipping

calendar iconOct 6, 2021

America’s service workers are missing the certainty and immediacy of cash tips as many businesses are encouraging cashless payments, with some losing income to processing fees and the various distribution methods used by employers. A cashless payment outage just two weeks ago threw the problem into sharp focus.

Over 80 percent of service workers experience some kind of wage theft, according to research from Workers United, a labour union with 80,000 members across the United States and Canada. Clara Wheatley-Schaller, Political Director at Workers United NY NJ, explains an example of this is when customers add tips using a credit card, and that money is not paid to the worker. Even if companies correctly distribute cashless tips, the money may be reduced due to processing fees. The safest way to ensure workers are receiving their entire tip, says Wheatley-Schaller, is to hand them cash.

Cashless tips are also hard for workers to keep track of, meaning they’re unlikely to know exactly how much they will receive in their wages. Ashley Torres, a recent IHOP hire, says customers are paying with a mix of cash and cashless options, but cash tips are the most welcome.

I prefer cash tips, because I get to keep count of how much I’m making.
"Ashley Torres, IHOP Employee

Complications also arise when companies try to manage cashless tips. Starbucks introduced a system to allow customers to tip employees directly from an app on their phones, but recently they brought in a rule meaning they will tax all digital tips and then add the remainder to workers’ wages.

A staff member at a Starbucks outlet in Los Angeles, known only as Kim, reports workers generally prefer cash tips because they are distributed weekly to all staff, divided according to hours worked and placed directly into their hands.

Digital tip distribution is dependent on proper time punches being logged, which isn’t always the case by store managers. We don’t see the amounts or how they are distributed. There’s no more transparency there.
"Kim, Starbucks Employee

Holona Ochs, Associate Professor of Political Science at Lehigh University in Pennsylvania, also notes that if a business receives money, then pays employees at a later date, that delay will end up costing the worker. It also more strongly disadvantages those who are already earning less, since that time element ‘is more important, budgetarily speaking, to people who are less resourced.’

A lot of times, people who work for tips are working from more vulnerable economic positions, and so having cash on hand is something that is beneficial for them.
"Holona OchsAssociate Professor of Political ScienceLehigh University
Last Updated: Oct 6, 2021