Top Tips for Gratuities in Liquor Stores

By: Amy Watkins

Whether it’s rounding up a purchase or saying thanks for a great recommendation, customers have long been used to dropping change into a liquor store’s tip jar.  With the rise in popularity of electronic payment, the topic of tipping in liquor stores has come to the forefront with some quietly introducing electronic gratuities at the point of sale.

Electronic Payments – The Tipping Point

While electronic tips have been common in bars and restaurants for as long as we can remember, adding a tip onto an electronic payment in liquor stores is a new, and hotly contested, idea in BC. Some customers might respond positively to the added pressure of a tip option during payment, while others feel it is an off-putting part of the retail experience.

Recently a Kelowna-based liquor store received negative media coverage when a customer claimed that a 15% tip had been automatically added onto their bill. The liquor store refunded the customer and explained that the tip was optional, but perhaps not well communicated by staff. This media attention reminds us that tips should always be optional rather than expected.

While electronic tipping might not always be popular with the public, managers often face internal pressure from staff to provide the option. One liquor store owner in Vancouver cited staff pressure as a reason for allowing electronic tipping, finding it harder to retain staff when there was no option to add to their wage with tips.

“Tips can add $3-6 an hour onto staff’s wages.”

ABLE’s Executive Director Jeff Guignard estimated that tips can add $3-6 an hour onto staff’s wages, making quite a difference in a time when the cost of living has shot up and inflation makes it harder for small businesses to pay competitive wages.

If you introduce a tip option to your point-of-sale system, the most important thing to remember is how you communicate this to both staff and customers. Ensure your team is equipped to have difficult conversations, and make it abundantly clear that adding a tip is not required.

Gratuities at the Grocery Store?

Switching to an electronic payment system that has a default tipping option is a great way to start introducing tips to customers. Although the perceived expectation can garner negative reactions from people who don’t believe in tipping in a retail setting. With only 57% of Canadians willing to tip for counter service in a cafe, is tipping in a liquor store a hard sell?

“Is tipping in a liquor store a hard sell?”

Some businesses echo the common argument on social media that tipping in a liquor store is akin to tipping at a grocery store. These businesses are avoiding the issue of tipping and not introducing an electronic tip option.

Liquor Plus has nine stores on Vancouver Island and keeps it simple by not using a tipping system at all. “We don’t allow tips at Liquor Plus,” says Liquor Plus General Manager Sean Large, echoing a sentiment from disgruntled customers. “I’m not a fan of them in a retail environment. Though our teams are extremely helpful and engaging, they haven’t created anything or provided an extended period of service that would require tipping. I liken it to tipping at a grocery store or London Drugs or Costco… it seems to be the totally wrong environment for it.”

The Traditional Tip Jar

Chances are your liquor store already has the slightly softer option of the classic tip jar on the counter. It’s a chance for staff to be creative with jar labels like ‘feeling tipsy?’ (raising a smile if not revenue) to request tips instead of flipping a screen around to a perhaps unsuspecting customer.

The tradition of having a tip jar on the counter has been carried across from the days of liquor stores sharing a licence with the pub next door.

One long-time liquor store manager based in Surrey keeps the tip jar option based on tradition. “There has always been a tip jar at the till since I started in liquor retail in 1991,” they say. “I assume it is because retail stores were located on the same property as the pub licenses that the license was attached to.”

They say that occasionally a customer will comment negatively but most customers are used to retail liquor stores having a tip jar: “Staff appreciate tips, but they do not expect tips. They would never request tips.”

Top Tips for Dealing with the CRA

When it comes to distributing tips, staff tend to split them equally by shift and, as per BC’s employment law, all tips must go to employees and not the employer.

One consideration is that the payment of tips, especially via electronic payments, can add to your obligations when it comes to reporting to the CRA and making CPP/EI deductions.

Recently the Federal Court of Appeal upheld a decision in Ristorante a Mano Limited v. Canada (National Revenue) which determined that some electronic tips are subject to payroll deductions for CPP and EI contributions. Previously, tips were considered income under the Income Tax Act but it was debatable if they counted as “pensionable earnings” and/or “insurable earnings.”

How do you know whether these deductions/contributions need to be made? It all depends on whether the tips are paid by the employer (controlled tips) or paid by a customer (direct tips). Controlled tips are counted as part of a wage and are eligible for deductions, whereas direct tips are paid directly from the customer to an employee (i.e., cash) and there is no need to make CPP/EI deductions. The Ristorante a Mano decision was based on the common scenario of electronic tips being given back to staff (due backs) the following day, and in this case the CRA counted them as controlled tips that should have had deductions.

If you’re collecting electronic tips and then splitting them between staff, just be aware that the CRA could count them as controlled tips that are eligible for deductions for CPP/EI. Check with your accountant to stay on the right side of the CRA.

When it comes to top tips for tipping, the best advice is to listen to staff and customer feedback. Always make tips optional, especially if you’re introducing an electronic tipping option, and ultimately decide what’s right for your business and your customers.