Do Tip Percentages Affect Server Job Tenure, or Vice Versa?: Evidence From a Panel Dataset

Abstract

Increasing compensation reduces turnover in other industries, but it is unclear if increasing tip percentages will reduce turnover among tipped service workers. This question was examined using a panel data set on the charge tips of restaurant servers over time from POS systems. The results indicate that tip percentages were generally consistent across servers’ running workday counts (in other words, across growing levels of server experience), but were slightly higher overall for those servers who ultimately stayed in the job for more workdays. These findings provide more compelling evidence of a potential tip percentage effect on server tenure than is provided by existing cross-sectional correlational data sets. However, the effect of servers’ average tip percentages on their tenure was relatively small—accounting for only 5% of the variance in server tenure, as compared to 14% accounted for by servers’ average dollar tips per day and 33% accounted for by servers’ average number of daily checks. Compensation is important, but when it comes to restaurant waitstaff turnover, other things may matter more.