The rule of 25% for calculating restaurant tips

I’m often asked to figure out the tip at restaurants because I have a degree in math. I used to explain that a math degree does not mean I’m a human calculator, but I decided it would be easier to have a rule of thumb on hand so I can appear intelligent.

My friend suggested a rule I really enjoy: take the menu total and add 25% to take care of tax and tip. If your item was $8 on the menu, then your total should be $10. That’s it. If sales tax is around 5-8%, you will be tipping just above 15% of the post-tax subtotal. And yes, I know there is disagreement about pre-tax tipping and post-tax tipping. I just choose to tip post-tax since it doesn’t cost much more and wait staffs have never minded.

I like the rule of 25% for a few reasons:

  1. I can figure out 25% in my head very easily by dividing by 4.
  2. You can estimate the true cost of an item from the menu price. A $10 appetizer really costs $12.50 on the final bill.
  3. I don’t have to worry about tax separately.

The method does mean you tip more for places where tax is 5% instead of 8%, but the difference is not much. Also, if my company ever questioned my tipping practices on an expense, it would be easy to tell them I use one method consistently.

And if service is exceptional, I do tip 20-25% instead of using my shortcut rule. I might even bust out my cell phone calculator just to be sure I’m giving enough.



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  • http://www.mawsoft.com/blog RohoMech

    Another thing I find useful, doubling the tax (as its in the 5-8 range) and using that as a guide.

    But yea, busting out the cell phone calculation is a great way to roll to.

  • Joe P

    I never go by a strict percentage (although a rarely ever tip less than 15%). Basically, my goal is to make sure my credit card statement at the end of the month does not have a lot of loose change…and not to have loose change in my pocket if I’m paying in cash. For example if a bill costs me $10.18, I typically would not pay the exact $1.53 tip – rather I would pay more to make it $12.00 total, or $13.00 if the service was excellent. Sure, over the long run you may pay a little more in tips, but I’ve discovered that it hasn’t hurt me too much. Plus, when you go to a restaurant enough (BWW) the wait staff learns to take excellent care of you, with extra effort than usual. The BWW example has me getting extra wings with consistancy, or sometimes a beer on the house, or an extra flirty waitress. It’s a win-win scenario.

  • http://www.mindyourdecisions.com Presh

    @Rohit: Doubling the tax is also nice, but I then have to add that to the post-tax total, which is usually not a round number. The 25% rule is great since menu costs are usually a round number.

    @Joe: I agree with giving exceptional tips to exceptional service. My question to you: what difference does it make if your credit card bill has “loose change.” You pay directly from your checking account, so no “change” is actually transferred. Same reason why I don’t understand topping off gas to the nearest dollar…

  • http://www.askdong.com dong

    Like Joe, i’m found of rounding to a whole dollar. More habit than anything else. Not because of any desire reduce “loose” change, but just because it makes my statements easier to read and sort out.

  • Joe P

    That is my motivation as well.

  • http://www.mindyourdecisions.com Presh

    @dong and JoeP: Fair enough. I do emphasize that your preferences are important to decisions.

  • Joon

    I agree with Joe, although I go more towards 18% as a minimum and 20% as the norm. I’ve never had any qualms about doing the “math.”

    It also helps to break the asian stereotype.

  • http://www.mindyourdecisions.com Presh

    @Joon: You can do 18% in your head? That’s some thing. I’m going to test this next time we meet up.

  • Joon

    haha i wish. not gonna put in that much effort. i ballpark 18-20 and round up.

  • jyu

    ya i usually double the tax and then round it to the even dollar-up or down whatevers closest- like mr. joe p

    personally i think the concept of required tipping is stupid…but it does reflect the american attitude that everyone owes us something even if we dont deserve it

    something i like about asian countries, if you try to tip they look at you like you’re retarded

  • http://www.mindyourdecisions.com Presh

    @jyu: The required tipping is weird.

    Economically, tipping is supposed to be a reward for good service; it keeps waiters honest. Owners could add 20% to all menu prices and ask you to pay no tip. But they worry the service may go to hell.

    That’s the theory any way. I do wonder about the theory since I’ve never felt service was worse in places without tipping.

  • Kyle

    I think calculating 20% tip is very easy.

    Take the cost of your meal and divide by 10 (Just move the decimal place) or multiply by .10 whichever makes more sense to you and then double it.

    Let’s say it is 17.80, divide by 10 gives 1.78 (I usually drop the ones digit at this point whether rounding up or down) rounds to 1.80 and multiple by 2 = $3.60.

    Similarly, you can do 15% by dividing by 10, saving the value, dividing that value by 2, and then adding the two together.

    17.80 becomes 1.78 which rounds to 1.80. Divide by two is .90, and add the two together = 2.70.

    Kyle

  • David

    Calculating tip with pen and paper was how my mom taught me about how to multiply and add numbers with decimals when I was a kid. So if you happen to have a small child with you, tipping can be a learning experience. Otherwise, of the listed methods here, I’d say 25% is the fastest, especially with the easy calculation from menu price.

  • http://www.mindyourdecisions.com/blog Presh Talwalkar

    @Kyle: That’s why we always let you calculate the tip :)

    @David: Another fun game is to pit your children against each other by letting them guess the total bill (without seeing the receipt). It’s amazing how quickly a child can learn a $100 is really not that much money.

  • http://seabirdskitchen.blogspot.com Chris Bird

    Ilike this 25% approach and will probably adopt it once I have figured out how to subtract the tax out!

    Seriously though, I absolutely hate tipping. I would very much like to see wait staff paid a living wage. Maybe a “government health warning” like, “We pay our wait staff so little that they need tips to survive at all” required in large letters on the fronts of menus at places that don’t pay a living wage. One dirty little secret is that at some of the higher end restaurants the waiters are paid pretty well, and the tips are perks for them. At those kinds of places I generally tip less – at least when I can find out that the wait staff are paid.

    To help the kids, I developed a rule of thumb, when dining out at a decent restaurant for 2 including wine, the final bill will be approximately 6 times the cost of the more expensive main course. This is a wildly inaccurate approximation, but does allow me to do a “budget” (yeah, I know I have read the budgeting blog posting)or to make a decision on how much I want to spend, if that is more appropriate in here, for the dinner. I have used this without fail for more than 30 years. It doesn’t help with the tip though :-(

  • http://www.mindyourdecisions.com/blog Presh Talwalkar

    Chris Bird: I like your rule of 6 times the most expensive meal! This will make for very good conversation starters ;)

    I do loathe budgeting (thanks for reading that one), but often these rules are similar to the idea of “focal points”–a way to converge on agreement or start out with the right frame.

    You raise a question about the practice of tipping. I’ve heard interviews with managers that tipping isn’t about money but rather giving an incentive for service. I wonder if this is really true since there are many jobs people seem to work out of duty and they don’t need a tip to perform better.

    Tipping also creates problems for people unaware of the customs. Who do I need to tip, and how much? I never know. Nowadays, I’m going to nicer places and finding I need to tip someone to get a towel after I wash my hands. I don’t always have singles, so I feel out of luck. I see many men just run out without washing their hands to avoid the awkward interaction. What a strange result of tipping.

  • fred jones

    Most of the world works on the theory that if a restaurant cannot pay it’s staff a fair wage then it is not viable just like any other business why should employees have work for tips? another word for that is SLAVERY

    By tipping your simply encouraging restaurants to not pay their staff properly, it’s their responsibility not THE PERSON BUYING SOMETHING FROM THEIR BUSSINESS.

  • Gary

    The restaurant business really has pulled one over on everyone. You not only have to pay for the food, you also have to pay tha salary of the servers. Check next time and actually count how many minutes a server spends on you. It rarely goes over three minutes for a meal. Now, take a $100 meal for four and add 20%. At $20 for the tip, the server made a rate of $400 per hour during the three minutes they spent on your table. That is excessive. Why did tips ever go above 10%? If prices increase, so does the tip, since 10% of a larger total is a larger amount. If bad service is the issue, that is the management’s responsibility to correct. Nowhere else do workers have to be periodically handed extra money throughout their work day to insure acceptable performance. The practice of tipping should be ended. Pay the servers a wage appropriate with the skills required to do the task, and manage them accordingly to make sure they provide customers with an enjoyable experience.

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