Business Maverick, Africa

Cashless payments, taxing tips hit ‘waitrons’

By Phillip De Wet 15 August 2011

It's a system that has worked well for generations: Serving staff are paid a pittance, but take home cash tips from customers that, under the right circumstances, can make for a decent living. Take cash out of the equation, however, and things get tricky. By PHILLIP DE WET.

It was quite a coup for Beyond Payments, a unit of Standard Bank that plays with interesting new technology. Every visitor to the Oppikoppi music festival held earlier this month was issued with a tap-’n-go card (which uses near-field communications to complete transactions, much like a debit card, only faster) and forced to use it for the duration, because vendors weren’t allowed to accept any cash. So thousands queued to buy their beer and food using cutting-edge cashless technology.

And a large proportion of the bar and waiting staff walked off the job on the first day.

Serving beer to large groups of drunk people isn’t a spiritually rewarding job, but it can be a lucrative one. Tipsy people tend to leave tips, those who suffer trying to attract the barman’s attention in a crowd the first time around may be smart enough to tip handsomely and the small amounts of change patrons leave behind because they’re just not worth dealing with can really add up.

Take cash out of the equation, however, and things change rapidly. Systems may not make allowance for tips on what are essentially small retail transactions. Consumers aren’t geared to actively tip on such transactions anyway (as opposed to passively leaving a couple of beer-soaked coins on the counter). Mandatory service charges are unpopular among patrons, and tend to be smaller than a wily “waitron” can extract. Larger transactions, such as settling a tab or paying for a meal with a credit card, provide better opportunity, but tend to encourage simple rounding-up or addition of a tip of about 10%. They are also traceable – and now taxable.

Trading rules now require waiters to hand tips over to their employers as soon as they are received, to be repaid along with regular remuneration at the end of the week or month. Justifications include protecting staff from carrying around cash, but the effect is that tips – cash or otherwise – are declarable income, attracting tax. They are also fully visible to employers, who have long used the ability to earn tips as leverage in negotiating slave wages.

Enforcing the requirement that cash tips be handed over is hard in most larger serving environments, even assuming a willing employer, but with cashless payments it is virtually impossible not to comply and pay tax. As cashless payments increase – and there is no possible reason to expect otherwise – that requires a recalculation for all parties involved. The Oppikoppi example nicely illustrates that base salaries, as they currently stand, aren’t considered sufficient reward. Somebody will have to pay to keep serving staff on the job. It’s not yet clear whether that will be customers, by way of higher prices, establishment owners by way of reduced margins or the most vulnerable group, the underpaid serving staff. DM




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