This is not good.

A few approaches have been tried, in an effort to raise our service standards. These include:

Industry awards for outstanding individuals. These include the SPRING Singapore Excellent Service Awards. In fact it was at one of these award ceremonies that our latest service rankings were unveiled. The difficulty with such awards is that by definition the recipient must be outstanding. This means that the average worker does not have that much of an incentive to improve service quality, especially if he/she does not expect to be nominated.

Tokens of customer recognition. These include the GEMS (Go the Extra Mile for Service) cards; customers can fill in details on these cards and then give them to staff as a gesture of appreciation. However these cards may not be used as often as one might hope: this is because submitting a card to an employee requires a pen to be produced and a card to be filled with data. This may work in a sit-down restaurant setting, but patrons of counter-based staff may be in too much of rush to do anything beyond collecting their goods and opening the wallet for payment. It is also up to the employer to determine how staff members should be rewarded for having received many GEMS cards, and these rewards may not always have incentive power.

Service quality campaigns. The above two measures are part of an overall campaign to promote service quality. It is however still up to the employer to decide how quality should be encouraged and recognised. However, as the idiom goes, there is many a slip 'twixt cup and lip: employees with good service skills may not be recognised by the employer, and the mode of recognition may not be adequate in the context of other job incentives. For example, if performance is ultimately assessed by how many customers are served, then employee behaviour will tend towards a high throughput of customers, less regard being paid to polite, high quality service.

Tipping instead of Service Charging

Is there a way to alter working practices so that service quality becomes the centre of each customer encounter? Here I examine one solution which has been discussed: that we should abolish the existing 10% service charge, and let customers make up the difference with tipping.

I tried to obtain the raw data for the World Economic Forum report, so that I could try correlating service standards with tipping practices across different countries. Unfortunately I couldn't find it online--maybe a friendly reader can send it to me? :)

In the meantime, let's explore the arguments for and against the proposal. It is important to note that these are just conceptual arguments; any decision on public policy needs to be backed up with evidence--hence my request for data.

Reasons in favour of abolishing the service charge:

Tipping is a more effective incentive for good service. Unlike employer-led bonuses, which depend on a manager's impression of performance, tipping is a direct measure of customer satisfaction. Many of us have heard anecdotes about the employee who wayanged his way towards a good service award, while his more hardworking compatriots missed out despite doing better frontline work. However in a tip-based reward system, the ultimate determinant is the customer's experience of service (or lack thereof!)

Every customer encounter is an incentive for good service. Cash motivates more than any GEMS appreciation card or Good Service Award, especially for frontline staff who may not be earning large amounts. While we cannot give awards to every employee, the prospect of a good tip is an incentive for all frontline staff. And with tipping, each and every customer encounter provides an opportunity to be rewarded for providing good service.

Consumer rights. Under the existing system of 10% service charge, a customer dissatisfied with service quality has to contact the restaurant manager and dispute the bill. Even if the 10% is subsequently waived, the status quo sends an implicit message that the customer is expected to pay a 10% gratuity, since this is the default outcome. Such a social contract is only fair if good quality service is the default as well.

Employees are rewarded directly. Currently an employer may distribute the proceeds of the 10% service charge as he/she sees fit. All, some or none of the 10% service charge might reach the service staff.

Wage flexibility. If tipping income becomes substantial, it also allows employers more wage flexibility. This would be important in a downturn, as wage flexibility can be the difference between taking a pay cut and being retrenched.

Integrated Resort. Visitors to the casinos and Integrated Resorts (IRs) are likely to be high net worth individuals. A satisfied customer at these venues might give significantly larger tips. This may also make IR service jobs more attractive: combined with the "glitter" and "prestige" factor, it could recruit Singaporeans who might otherwise not have considered a job in the service sector.

Reasons for keeping the service charge:

Singaporeans might not tip. After years of compulsory service charging, there might be no instinct to tip among Singaporean customers.

Also, any such legislation must include protection for the tip, so that an employer cannot take it away.

Tipping discriminates against some customers. Poorer quality service may be received by customers who have a "low net worth" appearance, or who hail from a culture of not tipping. This may explain the occasional accusations about well-dressed expatriates getting better service in Singapore, since some choose to tip even despite the service charge.

Yet this discrimination could happen anyway, tip or not, as a "high net worth" customer is more likely to spend (or return to spend at a later date) if he is feeling well served. The economic incentive is merely less direct.

Frontline vs Back-of-House workers. Some commentators say that tipping is unfair to non-frontline workers such as the kitchen staff in a restaurant, who may be surviving on low wages. I am not sure if this argument holds, though. The mandatory 10% service charge is equivalent to a 10% increase on listed prices; one could easily incorporate it into the menu without calling it a service charge. Furthermore, if back-of-house workers are suffering due to low pay and poor working conditions, that is an argument for a higher base salary.

Downward pressure on wages. If tipping income becomes substantial, then employers may lower the base wage for frontline staff. This has subtle knock-on effects. For example, given the same take-home income, a tipping regime would see less money going towards CPF contributions (which for salaried employees is tied to the declared salary). This means more money in the worker's pocket upfront, but less CPF and MediSave for old age.

The two systems also have differing effects on the balance of relationships between customer, employee and employer. In a tip-based culture, the serving employee is partly an independent contractor, as a variable component of his salary flows directly from the customer. In a culture of service charges, the employer controls all remuneration.

I don't have a clear answer on this issue, although more data would certainly help the analysis. Maybe a charitable reader could send me some detailed figures on service quality scorings and rankings worldwide?

Some links on tipping versus service charging:

[1] Steven A. Shaw. "Tipped Off". New York Times, 10 Aug 2005.
[2] Patrick McGeehan. "What, No Tip? Service Charge Faces Struggle at Restaurants". New York Times, 15 Aug 2005.
[3] James Surowiecki. "Check, Please". The New Yorker, 05 Sep 2005.
[4] Jon Bonn�. "Per Se's Service Charge". Amuse-Bouche.Net, 11 Aug 2005.
[5] Laura Bly. "The tipping point: Will service charges replace voluntary gratuities?". USA Today, 25 Aug 2005.
[6] "Tip or Service Charge? Part II". DivisionOfLabour.Com, 24 Aug 2005.