Many people don’t carry cash because much of our economy has shifted to contactless and digital payments. When someone says, “Sorry, I don’t have cash,” that might be literally the case, and not just trying to get away without paying a tip. Unfortunately, that’s bad news for employees who traditionally rely on tips to make a living wage, such as waiters and hotel staff.
That exacerbates the situation for many in the hospitality and restaurant industry. The staff retention landscape is changing, partly due to the pandemic. Many were laid off during the crisis and did not want to return, so the focus shifted to attracting and retaining top talent.
The leading retention angle for employers is wages. For example, over 62 percent of restaurant workers’ earnings are from tips. Instant access to them can provide a competitive edge against other employers and improve retention. When employees get their tips after a week or month, it takes longer to feel rewarded, making it less motivating to work hard and stay in the role.
Implementing a digital tipping system can help with that. It gives guests an easy way to leave tips digitally, allowing them to tip employees as they deserve. A digital tipping system can significantly increase employees’ paychecks and drive employee engagement and guest satisfaction.
Moreover, digital tipping has gained momentum among customers, who prefer the convenience of cashless options. However, implementing a tipping platform requires careful consideration, and following best practices can ensure success.
Here’s everything you need to know to transition from cash to digital tipping system:
The Importance of Digital Tipping System
The pandemic sped up the shift towards cashless payments. Businesses and consumers prioritize contactless transactions for health and safety reasons.
As a result, we expect a continued surge in the adoption of digital tipping systems as businesses and creators seek to cater to the preferences of their customers and fans. Those who embrace cashless tipping solutions will be well-positioned to thrive in the new normal. At the same time, those who resist this shift may struggle to keep up with changing consumer expectations.
Use Cases:
Digital tips software isn’t a one-size-fits-all solution. Still, it offers a range of advantages for various businesses and professions. Here’s how different industries can leverage its capabilities:
1. Hospitality
Servers, bartenders, baristas, and other service staff can receive tips directly through a digital platform. That eliminates the need for cash handling and ensures tips are distributed fairly. Digital tipping systems can also be integrated with mobile ordering systems, allowing customers to tip at the point of purchase.
2. Restaurants and Bar
Automate tip distribution among wait staff, bartenders, and bussers and streamline end-of-shift processes. digital tipping system can also be integrated with Point-of-Sale (POS) systems, allowing customers to tip directly at the payment terminal after meals.
3. Salons and Spas
Clients can tip stylists, massage therapists, and other service providers through a tablet or online booking system. That eliminates the need for clients to carry cash and ensures stylists receive their tips promptly.
4. Delivery Services
Facilitate tipping for delivery drivers directly through the delivery app to incentivize faster deliveries and better customer service while ensuring drivers receive their tips immediately.
5. Ride-Sharing Services
Allow passengers to tip their drivers electronically through the ride-sharing app, providing a convenient and secure way to show appreciation for a smooth ride.
6. Salons and Barbershops
Modernize the tipping experience for haircuts, shaves, and other services. Digital tipping systems can be integrated with appointment scheduling software, allowing customers to pre-tip online when booking appointments.
7. Food Trucks and Kiosks
Even cash-only businesses can benefit from digital tipping. Using smartphones, customers can leave tips electronically by providing QR codes or near-field communication (NFC) tap-to-pay options.
8. Content Creators
Musicians, streamers, writers, artists, and other content creators can leverage digital tipping to receive financial support directly from their fans. Platforms can be embedded on websites, social media profiles, or within live streams, allowing viewers to show appreciation for their work.
9. Online Services
Digital tipping can benefit freelancers, virtual assistants, and other online service providers. Customers can easily express their satisfaction with a completed project or ongoing service with a quick tip, which can be a valuable revenue stream for these individuals.
10. Personal Service Providers
Hairstylists, dog walkers, house cleaners, and other independent service providers can accept digital tips through invoicing apps or online payment platforms. That simplifies their financial management and ensures they receive tips for their work.
Best Practices
To maximize the benefits of a digital tipping system, you must follow a set of best practices that ensure a smooth, secure, and rewarding experience for all parties involved.
1. Set reasonable limits
One of the first considerations when implementing a tipping platform is setting appropriate limits on how much customers can tip. While it may be tempting to allow for unlimited gratuities, this approach can lead to potential issues.
Capping tips at a reasonable amount also mitigates the risk of fraudulent activity or excessive chargebacks. That ensures that businesses can still benefit from the generosity of their supporters while maintaining some control over the tipping process.
2. Offer subscription-based tipping
Another effective strategy for businesses and creators is to offer subscription-based tipping instead of one-off gratuities. By allowing customers to set up recurring tips weekly, monthly, or annually, merchants can create a more predictable and sustainable revenue stream. This approach also fosters a sense of ongoing support and loyalty among customers, as they feel more invested in the success of the business or creator over time.
3. Provide various payment methods
Offering customers tipping choices ensures a seamless and inclusive experience. Consider accepting direct bank transfers or local payment platforms as options to the usual credit and debit cards. Offering a range of payment options allows you to cater to diverse customers and encourage tipping.
Choosing the Right Platform
The question is, how do you know you’re picking the right platform for your business? It would help if you took the time to research the available tips, software, and platforms for long-term success. Consider the following critical factors from your perspective and your employees.
1. Pricing
The cost of the software will obviously be a top priority for you. Find out if a platform charges a flat fee or as a percentage of transactions. You should also investigate if it imposes transaction fees and who pays for it, you or the employee receiving the tips. Make a simple cost-benefit analysis to determine if the cost is justifiable.
2. Security and compliance
Whenever software involves financial information, your priority should be protecting the data. Narrow down your choices to FDIC-insured platforms that use industry-standard security, such as data encryption, multi-factor verification, and backup and disaster recovery systems.
3. Reporting and tracking
Managers can use reporting and tracking capabilities to help with internal audits and taxes without creating spreadsheets. They can analyze tip distributions, identify trends, and generate comprehensive reports. Having an accurate paper trail that can be accessed with just a few clicks ensures that you are prepared when needed for tax purposes or in case of any employee disputes.
4. Customer support
Evaluate the platform’s customer support level. Must you set up the software solution alone, or will they help? Do they have 24/7 customer support? Timely and responsive assistance during the transition is critical.
5. Reputation and reviews
It has never been easier to get feedback from other users. A quick search can give you much information about a platform’s standing in the market through customer reviews and testimonials. That can give you valuable insights into a service provider’s reliability, advantages, and drawbacks. Start with reputable software review sites like Capterra and G2 and take it from there.
6. Integration
Integrating new software into an existing tech stack can be a major headache if there are compatibility issues. Implementing digital tipping system is supposed to make your life easier, not harder. Contact the platform for information on the software’s integrations. Some platforms are all-in-one so integration won’t be a problem.
Establishing Policies
The key to a smooth transition is to address concerns with clear policies and timelines in place proactively. By establishing well-defined staff policies for digital tip distribution software, you can ensure employees know what to expect before rolling it out. The specific policies that work best for your restaurant may vary, but here are some examples to consider:
Your confidentiality policy emphasizes your business’s efforts to secure employee tips and bank information. Be transparent about who can access this information, security measures, and data privacy policies.
Sample template: At [Business Name], safeguarding the privacy of employee tip and bank details is of utmost importance. Only authorized personnel will have access to data, with strict controls. [Platform Name] utilizes [Security Measures] and adheres to data privacy regulations to protect sensitive information.
The training policy states the expectations and responsibilities of restaurant owners, managers, and employees regarding the digital tip payout process.
Sample template: We will offer training sessions to ensure all [Business Name] staff know about sending and receiving digital tip payouts. Managers will begin training on [X Date], and all other staff members will start on [X Date]. We will supply the necessary resources; onboarding must be finished by [X Date].
The tip distribution policy establishes a schedule for staff to receive tips. You can send them daily, every other day, or twice weekly. Whatever the case, solidify it by making it a policy.
Sample template: Employees should note that beginning on [Date], their tips will be delivered digitally every [Schedule] instead of [Previous Schedule] [Previous Method].
The dispute resolution policy describes the process for employee redress. If employees have concerns or issues or want to address discrepancies, they know the protocols.
Sample template: At [Business Name], we prioritize transparent communication and urge our employees to express any concerns or discrepancies regarding their tips. An employee with a dispute or issue should [Prescribed Action].
System monitoring and auditing policy outlines how frequently you inspect reports, transaction logs, and other relevant data for anomalies.
Sample template: We will regularly monitor and audit the digital tip payouts. We will check transaction logs, reports, and relevant data for anomalies on a [daily/weekly/monthly] basis.
Communications
Change can be scary for employees, and they’ll have questions. Transparency, honesty, and open dialogue are essential to getting their support. Consider scheduling in-person or virtual discussions for the implementation process. That opens the floor for employee interaction, where they can express their suggestions, ideas, and concerns.
Start by educating your employees about why this change occurs and what you’ve done before reaching this stage. Next, explain how the digital tip payouts can benefit them, such as faster and more accurate payments. Highlighting the advantages goes a long way toward helping them understand the reasons behind the changes.
Don’t shy away from tackling challenging issues such as transaction fees and data security. Provide clear and detailed information to address concerns openly. It’s important to demonstrate that you have carefully considered how these issues impact employees.
The next step is to provide employees with a timetable for implementation. You should include the following:
- When to expect invitations to the platform
- When to complete the onboarding process
- When they will start receiving tips
Encourage them to use the software’s resources, guides, or training materials. Remind them that they can ask questions or get clarification at any step of the process. You should also solicit feedback so they feel valued. Open communications can also help you gather valuable insights and suggestions for improvement.
Training
For the onboarding process, ensure employees have clear instructions and enough time to complete their setup. Contact the digital payment platform and ask for helpful materials like videos, user guides, or FAQs to share with your team. These resources will reduce confusion and allow employees to learn about the platform and its features at their own pace.
Hold training sessions specifically for restaurant managers on how to send tips digitally. Even though most platforms are easy to use, a live demo or product review with a representative will help managers feel more confident during the transition.
Remember to adjust your training methods to fit different learning styles. Some employees prefer hands-on demonstrations, while others do better with written instructions or interactive training materials. Offering a variety of training resources will ensure that you meet everyone’s learning needs and make the training as effective as possible.
Time To Tip
As an employer and operator, your role is to guide and create a positive environment for your employees when implementing digital tipping system. Support managers when they send their first digital tip payout and cheer for restaurant employees receiving them. Keep the platform’s Customer Service contact information handy and be the leader your team needs.
