Tipping Culture and Human Sustainability: How the Japanese Model Envisions Sustainable Service Management

Introduction

The concept of “tipping culture” varies widely across the globe, with each country and region attaching its own customs and meanings. In North America, it is almost obligatory to leave a tip of around 15–25% at restaurants and hotels. In much of Europe, a few euros are commonly given as a token of appreciation. In contrast, countries like Japan and those in the Nordic region have virtually no tipping practice at all. Yet, some of these nations are still able to maintain exceptionally high service standards, while in others, tipping culture is deeply embedded in the business and employment structures of the service industry.

In recent years, terms like “tip fatigue” and “tipflation” have been gaining traction in the United States. Not only have tipping amounts increased, but requests for tips have also expanded to settings like self-service counters and takeout orders, fueling growing consumer backlash. On social media, many express the sentiment that “tipping has shifted from being a gesture of gratitude to an obligation.”

In contrast, Japan’s service industry continues to earn global recognition without relying on tips. Behind this success lies the culture of omotenashi—deeply rooted hospitality—as well as long-term employment practices and a focus on accumulating expertise through human capital management. This approach is not merely a cultural distinction; it also carries significant weight from the perspective of management sustainability, or “human sustainability.”

This article will outline the history of tipping culture and examine its current state around the world, analyze its impact on business operations and employment, highlight the strengths of the Japanese employment model, and explore the potential of a new framework—what we call the “Japanese-Style Gratitude Tip.”

History of Tipping Culture

The origin of tipping is often traced back to 17th-century England. At the time, it was said that patrons in pubs and coffeehouses would leave coins with the meaning “To Insure Promptness,” a gesture intended to encourage swift service. A popular theory holds that the acronym from this phrase—“TIP”—gave the practice its name, although some linguists dispute this as the true etymology.

By the 18th century, it had become common among the European upper classes to give money to servers and domestic staff as a sign of gratitude or favor. This custom crossed the Atlantic in the late 19th century, taking root in the United States—particularly in the railway and hotel industries, where it soon became an established practice.

In the United States, this practice underwent a major transformation. After the Civil War, in order to hire freed slaves and immigrant laborers at extremely low wages, employers adopted a system of “keeping base pay exceptionally low and making up the difference with tips.” This approach eventually became institutionalized as the Tipped Minimum Wage system, which still exists today. Under this law, the minimum wage for tipped workers is set lower than that for other employees, with the assumption—and legal acceptance—that tips will cover the gap.

Global Comparison of Tipping Cultures

Tipping culture can generally be divided into three main categories:

Income Supplement Model

In countries like the United States, Canada, and Mexico, tips make up a significant portion of service workers’ living wages. In restaurants, hotels, and taxi services, the standard tipping range is about 15–25%. Failing to leave a tip is not only considered “rude” but can also inflict real economic harm on the worker, since their income depends on it.

Symbolic Gratitude Model

In countries like France, Germany, and Australia, service charges are often included in the bill. When customers receive particularly good service, it is still customary to leave a small tip—typically a few euros or around 10% of the bill. The key characteristic of this model is its high level of voluntariness: tips are seen purely as a gesture of appreciation rather than an obligation.

No-Tipping Model

In Japan, South Korea, and the Nordic countries, service charges are typically included in the price, making tipping unnecessary. In fact, offering a tip can sometimes surprise—or even confuse—staff. Wages are fully covered by the employer, and service quality is maintained through base pay, training, and formal evaluation systems rather than customer gratuities.

This difference is not merely a matter of “custom,” but a reflection of deeper distinctions in wage systems, labor markets, and management philosophy. In the next section, we will take a closer look at the operational and employment challenges inherent in income-supplement tipping cultures.

Management and Employment Challenges of Tipping Culture

The income-supplement tipping model may appear, on the surface, to be a system where consumers directly support service workers, but in reality it carries numerous structural issues. These include:

1. The Vicious Cycle of Recruitment and Retention

In a tip-dependent wage system, the lack of guaranteed stable income makes it difficult to cultivate employees who will stay long-term. Economic downturns, drops in tourism, and seasonal fluctuations can further destabilize earnings, prompting workers to seek more secure jobs elsewhere. As a result, companies must constantly repeat the recruitment process, turning hiring and training expenses into something akin to fixed costs rather than occasional investments.

According to data from the U.S. Bureau of Labor Statistics (BLS), the annual turnover rate in the food service industry can exceed 70%, far surpassing the average across all sectors. This high churn rate makes it extremely difficult for businesses to accumulate the know-how and skills needed to steadily improve customer satisfaction. Without long-term staff retention, service quality relies heavily on short-term fixes rather than sustained expertise, leading to an unstable customer experience over time.

2. Short-Term Management Mindset

The structure of shifting part of employee wages onto consumers via tips creates a short-term cost-saving advantage for business owners. This incentive naturally drives them to prioritize immediate revenue preservation over long-term workforce investment.

This is structurally similar to the “layoff practices” in which companies expand their workforce during economic booms and immediately downsize during recessions. From a financial perspective, treating human assets as a variable cost rather than a fixed one appears to offer greater flexibility.

3. Legal Entrenchment

In the United States, the Tipped Minimum Wage legally justifies this structure. At the federal level, as of 2025, the minimum hourly wage for tipped workers is set at $2.13. While some states impose higher minimums, in many states it remains lower than the rate for non-tipped workers. This is an exception within labor protection laws, and in effect, it preserves the conditions for unstable employment. By allowing employers to rely on customer contributions to make up wages, the system disincentivizes the shift toward fully employer-funded compensation, and creates a legal framework that sustains the dependency model rather than eliminating it.

4. The Pitfalls of Overemphasis on Marketing Metrics

In tip-dependent business models, KPIs tend to be heavily skewed toward short-term, numerical indicators such as “number of customers,” “average spend,” and “total sales.” Long-term value metrics like customer satisfaction, repeat purchase rates, and employee retention are often overlooked, and resource allocation is concentrated on quick-return marketing campaigns or discount strategies. As a result, the accumulation of intangible assets such as service quality and brand strength stalls, preventing the company from building a sustainable competitive advantage over the long term.

Strengths of the Japanese Employment Model and Examples of Human Capital Utilization

In Japan, despite the absence of tipping, a high standard of service is maintained thanks to a management culture that places strong emphasis on human capital. This is not merely a cultural trait, but is supported by structured employment practices and a management philosophy that values long-term workforce development.

1. Long-Term Employment and Skill Accumulation

Japanese companies tend to design contracts and shift schedules with long-term employment in mind, not only for full-time employees but also for part-time and temporary staff. In traditional ryokans and high-end restaurants, it is not uncommon to find staff who have worked in the same role for over a decade. This continuity allows for the accumulation of refined customer service etiquette, deep product knowledge, and strong relationships with regular patrons over many years. Service quality is upheld not merely by manuals, but by the intangible asset of on-the-ground experience — a form of human capital that cannot be easily replicated.

2. Creating a Work Environment That Enhances Employee Retention

Many Japanese companies place greater emphasis on employee retention than on recruitment. For example,

• Flexible shift scheduling
• Implementation of training programs and study sessions
• Through initiatives such as employee benefits — including staff meals, employee discounts, and company-provided housing — companies create a more comfortable and supportive work environment. While these measures are not direct strategies for increasing revenue, they ultimately generate a positive cycle: reduced turnover rates → lower recruitment costs → more consistent service quality.

Utilizing customer feedback

In Japan’s service industry, there is a strong culture of recording and sharing customer appreciation and requests, then using this feedback to improve operations. In traditional inns (ryokan) and hotels, guest surveys and direct comments are often incorporated into staff evaluation systems and even used as a basis for pay raises. This enables management to clearly identify which services directly drive customer satisfaction, while also helping staff maintain motivation.

Realizing Human Sustainability

By nurturing human capital over the long term, companies can build a resilient foundation capable of withstanding temporary economic fluctuations and changes in tourism demand. This approach is not merely about maintaining stable employment—it also drives the sustained enhancement of brand value. In this sense, the Japanese model of talent management serves as a true example of human sustainability in practice.

Proposing a New Japanese Model: The “Appreciation Tip”

As we have seen, Japan has maintained exceptionally high service quality without relying on a tipping culture. However, there is potential to further enhance this strength by introducing a new option: a tip not as wage supplementation, but as a visible expression of appreciation.

1. Difference from Wage-Supplementation Tipping

In Western tipping models, tips often serve as a direct supplement to employees’ living expenses, functioning as an integral part of the wage system. In contrast, the concept of a “gratitude tip” differs in the following ways:

• Separated from wages: The base salary is fully guaranteed by the employer’s responsibility.
• Role of Feedback in Evaluation: Customers quantify their appreciation and feedback, enabling management to use the data for staff performance evaluations and identifying areas for improvement.
• Message Over Amount: The focus is on heartfelt messages rather than the monetary value. Contributions can be optional and modest, accompanied by words of appreciation or personalized comments.

2. Implementation Method

The Practical Implementation Process In practice, the following steps represent a realistic approach to introducing a “Gratitude Tip” system:

1. Utilizing Digital Platforms
   Implement a system where customers can express their appreciation to individual staff members or entire teams via QR codes or mobile applications.
2. In-App Messaging Feature
   Allow customers to attach comments highlighting “what they appreciated” or “the service that made them happy,” adding a personal touch to their feedback.
3. Integration with Management Feedback Systems
   Aggregate and analyze customer feedback within the admin dashboard, and link the insights directly to staff evaluations, improvement plans, and training program themes.
4. Integration with Reward Programs
   Recognize and reward staff members who receive the highest number of appreciation points within a set period, offering both monetary and non-monetary incentives.

3. Expected Benefits

• Customer Satisfaction Visibility: Compared to traditional surveys, this method collects feedback that is more spontaneous, positive, and easier for customers to provide.
• Boosting Staff Motivation: Direct expressions of gratitude act as a powerful form of psychological reward, often more impactful than monetary compensation.
• Supporting Strategic Decision-Making: Enables management to quantitatively identify which services and customer interactions receive the highest ratings, providing data-driven insights for operational improvements and staff training.
• Reduced Turnover Rates: Creating an environment where recognition and appreciation are regularly expressed enhances workplace satisfaction and encourages long-term employee retention.

4. Risks and Countermeasures

• Avoiding Perceptions of Unfairness: Implement not only individual performance evaluations but also team-based assessments and role rotations to ensure equal opportunities for all staff members.
• Risk of Tokenism: Require customer comments and prioritize meaningful messages in the system’s design to prevent the practice from devolving into a mere financial transaction.
• Implementation Cost: In the initial phase, leverage existing payment and survey systems to minimize expenses and conduct small-scale pilot operations.

Human Sustainability and Global Trends

1. The Concept of Sustainability and Human Capital

Sustainability originally gained prominence in the context of environmental issues, but in recent years it has expanded into the realm of Human Capital. In considering the long-term viability of corporate value, human assets are now regarded as equally, if not more, important than environmental resources. The idea that “the quality of talent” and “employee retention rates” form the foundation of sustainable competitive advantage is becoming increasingly widespread.

2. Overseas Trends in Institutionalization

In Europe and the United States, systems are gradually being developed to promote human sustainability.

• EU CSRD (Corporate Sustainability Reporting Directive)
  Mandates that large companies disclose information on human capital — including turnover rates, training hours, and employee satisfaction.
• U.S. SEC Human Capital Disclosure Rule
  Requires publicly listed companies to disclose employee-related data and human capital strategies, including metrics on workforce size, turnover, talent development, and diversity initiatives.

• ISO 30414 (International Standard for Human Capital Reporting)
  Standardizes the disclosure of key human capital metrics, including employee turnover rates, investments in skills development, diversity and inclusion indicators, and other workforce-related data, to promote transparency and comparability across organizations globally.

While these measures appear to be initiatives aimed at enhancing “transparency” on the surface, they can also be seen as a form of corrective pressure on companies that have historically undervalued or neglected their human capital.

3. Compatibility with the Japanese Approach

Japan has traditionally emphasized long-term employment, in-house training, and the accumulation of on-the-job experience, making it highly compatible with the philosophy of human capital sustainability. However, current human capital management in Japan still relies heavily on qualitative evaluations, with limited use of quantitative data and real-time feedback.

At this point, introducing a ‘Gratitude Tip’ system could…

• Real-time measurement of customer satisfaction
• Measuring retention rate improvements for individuals and teams
• It can simultaneously provide quantitative data usable for ESG and CSRD reports.

Impact on Global Competitiveness

If the Japanese-style “Gratitude Tipping” system becomes widely adopted domestically, it could evolve into a model that overseas businesses can also implement. In the United States and Europe, in particular, there is growing backlash against traditional tipping practices and increasing debate over wage system reforms. A “gratitude-based system” — one that is not designed to supplement wages — would likely find a receptive audience in these markets.
This approach has the potential to become an exportable intellectual asset, serving as a new business model that showcases Japan’s service culture to the world.

Summary

In this article, we have examined the growing backlash against tipping culture in Western countries, the underlying factors that allow Japan to maintain high-quality service without tips, and the potential to leverage these strengths for future innovation.

The main points are as follows:

• Structural Issues in the Western Tipping Model:
  Tips used as wage supplements undermine job stability and service quality, leading to costly cycles of hiring and turnover.

• Strengths of the Japanese Service Model:
  Through long-term employment, accumulation of on-site experience, and active use of customer feedback, Japan achieves customer satisfaction that goes beyond standardized manuals.

• Affinity with Human Sustainability:
  The Japanese employment model aligns closely with global trends in human capital management. With strategic utilization of data, there is significant potential to further enhance these inherent strengths.

Overall, Japan’s service industry has strong potential to secure sustainable competitiveness by leveraging customer appreciation—not as wage supplementation, but as a tool for business improvement and talent evaluation.

CoCoRo編集部

サービス業支援メディア運営チーム

CoCoRo編集部は、「感謝の気持ちをカタチにする」ことをテーマに、サービス業界における新しい価値創造を目指す情報発信チームです。​デジタルギフティングや従業員エンゲージメントの向上に関する最新トレンド、導入事例、業界インタビューなど、現場で役立つ実践的なコンテンツをお届けしています。​おもてなしの心をデジタルでつなぐCoCoRoの世界観を、より多くの方々に知っていただくため、日々情報を発信しています。​