Gratuity

A gratuity (also called a tip) is a sum of money customarily given by a client or customer to a service worker, in addition to the basic price. Tipping is commonly given to certain service sector workers for a service performed or anticipated. Depending on the country or location, it may be customary to tip servers in bars and restaurants, taxi drivers, hair stylists, and so on.

Tips and their amount are a matter of social custom and etiquette, and the custom varies between countries and settings. In some locations tipping is discouraged and considered insulting; while in some other locations tipping is expected from customers. The customary amount of a tip can be a specific range of monetary amounts or a certain percentage of the bill based on the perceived quality of the service given.

In some circumstances, such as with U.S. government workers and more widely with police officers, receiving gratuities (or even offering them) is illegal: they may be regarded as bribery. A fixed percentage service charge is sometimes added to bills in restaurants and similar establishments. Tipping may not be expected when a fee is explicitly charged for the service.

From a theoretical economic point of view, gratuities may solve the principal-agent problem, (the situation in which an agent, such as a server, is working for a principal, such as a restaurant owner or manager). Many managers believe that tips provide incentive for greater worker effort. However, studies of the real world practice show that tipping is often discriminatory or arbitrary: workers receive different levels of gratuity based on factors such as age, sex, race, hair color and even breast size, and the size of the gratuity is found to be only very weakly related to the quality of service.

According to the Oxford English Dictionary, the word tip originated as a slang term, and its etymology is unclear. According to the Online Etymology Dictionary, the meaning "give a small present of money" began around 1600, and the meaning "give a gratuity to" is first attested in 1706. The noun in this sense is from 1755. The term in the sense of "to give a gratuity" first appeared in the 18th century. It derived from an earlier sense of tip, meaning "to give; to hand, pass", which originated in the rogues' cant in the 17th century. This sense may have derived from the 16th-century tip meaning "to strike or hit smartly but lightly" (which may have derived from the Low German tippen, "to tap") but this derivation is "very uncertain". The word "tip" was first used as a verb in 1707 in George Farquhar's play The Beaux' Stratagem. Farquhar used the term after it had been "...used in criminal circles as a word meant to imply the unnecessary and gratuitous gifting of something somewhat taboo, like a joke, or a sure bet, or illicit money exchanges."

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