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Tipping is often a hot topic, and it varies by country and custom. This information applies to the United States. (It’s been my experience that tipping generally occurs much less frequently and in significantly smaller amounts in Europe, for example.) Here is a little background related to the U.S.:

Servers in most U.S. restaurants are paid less than minimum wage. It’s presumed that tips will make up the shortfall between what they are paid by the restaurant and minimum wage. As of right now, servers & other restaurant workers who receive tips can be paid as little as $2.13 per hour. Your tip doesn’t usually just go to the server either; it’s usually split among other restaurant employees (such as the bus boy).

So while restaurant “TIPS” are rumored to mean “To Ensure Prompt Service”, the reality is that at least a minimum level of tipping would better be considered a normal part of the cost of a meal out. There are several guides to tipping out there if you are unsure of the percentage to use when tipping. Here’s how to figure the tip once you’ve decided on a percentage:

The most obvious way is simply to multiply. If your bill is $38.27 and you want to tip 15%, multiply $38.27 times .15 to get the tip of approximately $5.74. If you want to tip 20%, multiply $38.27 by .20 to get the tip of about $7.65. The same thing applies to other percentages. Most cell phones have a calculator on them if you don’t want to do the math in your head, or you can always use paper.

But there are also a few tricks to use in figuring out a tip. The one I use most involves rounding to the nearest $10. In that case, $38.27 would become $40. If I wanted to tip 15%, I would figure $1.50 for every ten dollars, giving me a tip amount of $6. A 20% tip is even easier to figure at $2 for every $10, and would give a tip amount of $8. (If I round down on the initial bill amount, I usually add on another dollar for the tip.)

In areas where the sales tax ranges from 7-10%, you can get by with doubling the sales tax amount (normally shown separately) and then rounding. For example, where I live sales tax amounts to 8.10%, so on a $38.27 meal the tax would be $3.10. Double that and you have $6.20, or a $6 tip. A nearby area has a 10% sales tax, so the tax on that would equal $3.83. Double that and you have $7.65, or an $8 tip.

Note how similar the final amounts in both of those tricks end up being to figuring the tip out exactly. ($6 vs. $5.74, and $8 vs. $7.65.)

Before you tip, be sure to check the bill to see if the tip has already been added. Some restaurants add the tip in automatically, generally at 18%. It will be listed on the bill as a gratuity, and there may still be a line available for an additional tip. Just put a line in that space if you don’t want to add an additional tip. This automatic gratuity is typically added for groups of a certain size.

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This post is part of a series. See what everyone should know about personal finance for links to additional posts on the subject.

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