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Gratuity

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Definition

A gratuity (tip) is a voluntary payment added to a bill to reward good service. It is calculated as a percentage of the pre-tax subtotal and is standard practice in US restaurants, typically ranging from 15-25%.

Key takeaways
  • Standard US restaurant tip: 18-20% of the pre-tax subtotal for satisfactory service.
  • Tip formula: Tip = Subtotal x (Tip% / 100). Always apply to the pre-tax amount.
  • Tip before splitting the bill - add the full tip to the total, then divide among the group.
  • Automatic gratuity (service charge) is often added for groups of 6 or more. Check the bill before tipping extra.
  • Delivery tips: 15-20% is standard, with a minimum of $3-5 for small orders.

$$\text{Tip} = \text{Subtotal} \times \frac{\text{Tip %}}{100}$$

What is Gratuity?

A gratuity - commonly called a tip - is a voluntary payment added to a bill as a reward for good service. It is expressed as a percentage of the pre-tax subtotal. In the US, tipping is a cultural standard at sit-down restaurants, with 18-20% now considered the baseline for satisfactory service.

Gratuities serve as a primary income source for service workers in countries where base wages are set below the standard minimum wage (notably the US). In many other countries - most of Europe, Japan, South Korea - tipping is optional or not expected at all, and service staff are paid a standard wage.

Gratuity explained to a beginner

Think of it this way: your restaurant bill is $50. You want to leave an 18% tip. Multiply $50 by 0.18 = $9. Your total payment is $59. That $9 goes directly to the server as a thank-you for their service.

If you are splitting the $50 bill with a friend and want to tip 18%, add the tip first: $50 + $9 = $59, then divide by two: $29.50 each. This is different from each of you tipping separately on your half, which could lead to uneven or forgotten tips.

When to use Gratuity

Calculate gratuity any time you receive table service at a restaurant, use a food delivery service, or receive personal services such as haircuts or taxi rides. Use the tip formula before splitting the bill so the tip is handled consistently.

Worked examples for Gratuity

This table quickly gives you the overview you need to understand Gratuity and its most important comparisons.

Bill totalTip %Tip amountGrand total
$40.0015%$6.00$46.00
$40.0018%$7.20$47.20
$40.0020%$8.00$48.00
$40.0025%$10.00$50.00
$120.0020%$24.00$144.00

Common pitfalls

The most common mistake is forgetting to add tip before splitting a group bill - each person ends up paying less than their share and the server receives less. A second mistake is double-tipping when a restaurant has already added a mandatory service charge (common for groups of 6+). Always read the bill before adding a tip manually.

Fast fact

In the US, restaurant servers earn a federal tipped minimum wage of $2.13 per hour (US Department of Labor, 2024); tips typically make up 60-70% of their total income.

Frequently asked questions about Gratuity

Should you tip on the pre-tax or post-tax total?

Etiquette guides - including the Emily Post Institute - say to tip on the pre-tax subtotal. In practice, most people tip on the post-tax total since it is the number shown at the bottom of the bill. Tipping on the full post-tax amount results in a slightly higher tip (by roughly the tax rate), which most servers appreciate.

Is gratuity the same as a service charge?

No. A gratuity is a voluntary tip you add. A service charge is a mandatory fee the restaurant adds automatically, usually 18-20% for large groups. If your bill already includes a service charge, you generally do not need to add a separate tip. Check the bill before tipping.

What is the minimum acceptable tip?

15% is widely considered the minimum acceptable tip for satisfactory table service in the US. For poor service, the standard advice is to leave a note explaining the issue rather than leaving nothing - a zero tip is often interpreted as forgetting rather than a deliberate signal.

Do you tip on alcohol?

Yes, in the US you tip on the full bill including alcohol. Alcohol inflates the bill significantly, which is why some groups use a custom split - the person who ordered the expensive wine pays a larger share of the tip.

Test your knowledge

Quiz: how well do you know gratuity?

4 questions · ~2 min

1. You have a $60 restaurant bill. You want to leave an 18% tip. What is the tip amount?

ℹ Tip = $60 x 18% = $60 x 0.18 = $10.80. Grand total = $60 + $10.80 = $70.80.

2. What is the widely accepted standard tip range at a US sit-down restaurant for good service?

ℹ 18-20% is the current standard for good service at a US sit-down restaurant. 15% is considered acceptable for average service.

3. Your group's restaurant bill already includes an automatic 18% service charge. What should you do?

ℹ Automatic service charges (common for large parties) already serve as the gratuity. Adding more would mean tipping nearly 40% total. Always read the bill before tipping manually.

4. Four friends split a $80 bill equally. Each pays $20. They forgot to add a 20% tip. How much is each person short?

ℹ 20% tip on $80 = $16. Divided by 4 people = $4 per person. Each person should have paid $24, not $20. Always add tip before dividing.

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