By Jenna Oosterholt

Every few months the conversation resurfaces: Should we eliminate tipping? On the surface, it sounds like a simple solution. Pay everyone a higher hourly wage and remove tips altogether. But eliminating tip culture would kill more than half, if not all of your favourite restaurants.

The reality is that most independent restaurants operate on profit margins of less than five per cent. There isn’t enough room to absorb the labour costs that would come with replacing tips with significantly higher wages. While large chains may have more flexibility, thousands of independent restaurants would be forced to raise prices dramatically to cover the labour and customers will almost certainly balk at prices like an $18 latte or a $30 sandwich.

Foodservice teams know that dealing with difficult guests, juggling ten tables at once, or working behind the scenes making sure the entire operation runs smoothly means that the people who make restaurants work absolutely deserve every tip they earn.

But that doesn’t mean the current system is perfect.

Tip culture

The irony is that many hospitality workers don’t want tip culture to disappear. On busy shifts, experienced servers, bartenders, and support staff often earn well above what a fixed hourly wage could provide and why shouldn’t they earn these high wages?

Think of the special moments in life like birthdays, anniversaries, graduation – the big moments in life of all kinds are usually celebrated by a great meal at a great restaurant. The meal itself is affordable because tips help keep operation costs down. Spending an extra 20 per cent on a tip for food and service that made the special night, well, special, is often acceptable.

For many hospitality workers, tipping isn’t just extra income, it’s what makes hospitality a viable long-term career, and there are so many who become experts in their craft. From the barista who makes a latte with her eyes closed, the server who always makes guests smile, and the cooks who work in hot kitchens so guest scan enjoy their favourite menu items.

Tip pooling

Tip pooling is a good option because it recognizes that restaurants succeed as teams. A memorable dining experience isn’t created by a server alone; it’s created by hosts, bartenders, line cooks, dishwashers, bussers, and everyone working together behind the scenes. When everyone shares in the success of the restaurant, the whole team is invested in making that success even greater.

Where operators often fall short isn’t about tipping itself, it’s how tips are managed and split with the team.

There is another important part of the conversation that often gets lost: tips are not automatic. A tip is, and should always be, the customer’s choice. Tipping exists because guests choose to recognize great service and food, not because it is an obligation added to every transaction. If a dish was cold and lifeless, the service was poor, or management failed to address a bad experience, customers should not feel pressured to reward that. A tip should reflect the experience.

Exploring the options

The real conversation shouldn’t be about abolishing tipping; it should be about creating systems that are fair, transparent, compliant, and easy for both restaurants and staff to understand.

The CRA has created clear rules around employer-controlled tip pools. If an employer controls the distribution of pooled tips, those tips must generally flow through payroll, creating CPP, EI, and tax obligations for employees while adding payroll costs for employers. Those deductions aren’t inherently negative – they provide transparency, reduce the risk of unexpected tax bills for staff, and help career hospitality workers build meaningful CPP and EI benefits. The simple reality is as society moves farther away from cash payments, there is a cost associated with taking tips.

Alternatively, restaurants can operate under a tip committee model, where employees control the distribution of tips themselves. While this can reduce payroll obligations, it also places administrative responsibility on staff and can create inconsistencies if the process isn’t well managed.

Neither system is wrong. Both can work exceptionally well, but the point is there needs to be a system and ideally the system in place rewards the entire team, rather than just the servers. It needs to be trusted by staff and owners, and it can’t cost an arm and a leg to use.

Tips reward great service and food, and when they are being fairly split, they encourage teamwork and provide income that many hospitality professionals rely on. Rather than asking how we eliminate tipping, we should be asking how we make it fair, more transparent, and more sustainable for everyone involved – staff, owners and customers alike.

Tip culture doesn’t need to disappear. It needs to evolve.

Jenna Oosterholt is the founder of Tippo, a tip management platform built to simplify tip pooling and bring greater transparency to restaurant teams. With more than 20 years of experience in the hospitality industry from working front-of-house to owning and operating successful restaurants, Jenna created Tippo after experiencing firsthand the challenges of managing tips. Following the sale of her restaurant, she now focuses on helping hospitality businesses save time, improve fairness, and create better experiences for both managers and staff.