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Savour

The Magazine of the Restaurant Association of New Zealand

Tipping in New Zealand: A Friendly Nod to Great Service

11 Mar 24
By Becky Erwood, RA PR Specialist & Business Owner

In New Zealand, the act of tipping is not driven by obligation but by satisfaction and personal choice. Unlike many places where tipping feels almost mandatory, here it’s like giving a friendly nod for great service. It’s not expected every time you dine out, but when it happens, it’s a big thumbs up to the staff.

Appreciation Over Expectation

In our corner of the world, tipping is a sign of appreciation, not an expectation. This relaxed approach is thanks to our fair minimum wage laws and solid wage growth, ensuring that our hospitality workforce isn’t dependent on tips to make a living. When customers do leave a tip, it’s a bonus not a necessity!

Tipping: Diner Discretion

Encouraging tipping as a voluntary show of gratitude allows customers the opportunity to reward a job well done. It’s about acknowledging exceptional service when they see it, and if their budget allows.

Transparency with Tips

We recommend clear tip distribution policies. While there’s no universal method, openness about how tips are shared can help avoid misunderstandings and ensure fairness within your team.

Key Insights for Businesses

Diverse Practices: The role of tipping varies across our industry. For some, it’s a significant boost to earnings; for others, less so. Understanding this landscape can help tailor your approach.

Automatic Tips: Automatic tip suggestions can feel pushy to some customers. Offering the choice to tip without pressure respects customer choice and maintains the genuine nature of gratuities.

Service Charges for Groups: Applying a service charge for large parties is generally accepted, provided it’s communicated clearly. This practice aligns with international standards and can streamline operations for your business.

Tipping in NZ is about giving and receiving thanks. It’s an optional, yet impactful way for customers to show their appreciation. For your business, it’s an opportunity to recognise and celebrate your team’s hard work. If we embrace this aspect of our culture with openness and integrity it will ensure a positive experience for all.

Tips as income

One big issue we face in NZ when we look at tips, is how we interpret them as a payment. Many believe that tips should be business income rather than the employees. In addition to this, some believe that if tips are separated from an employee’s income they receive directly from the employer (deeming tips as a separate income that the employee holds responsibility over).


While this continues to occur, modern day technology and approaches have brought several challenges to how tips are dealt with. This is also hindered by the fact that the law in New Zealand has stayed silent in relation to tipping. Because of this, we are forced to interpret tips in a way that aligns with employer obligations.


As mentioned, the law is silent on tipping in New Zealand. This leaves us with the responsibility of determining how tips are handled as income. Which leaves us with the question, are tips income of the business? Or do these payments count as employee income? And if they are employee’s income, should they be processed through the PAYE system?
From what we can see, Inland Revenue currently deems tips as payments that have not yet been taxed: https://www.ird.govt.nz/income-tax/income-tax-for-individuals/how-income-is-taxed/my-income-is-not-taxed-before-i-get-paid. With this in mind, we are inclined to take the perspective that tip payments are considered to be a gift to the employee and, therefore, taxable income. However, Inland Revenue defines these type of payments as non-taxable “if less than $200 is received in a single tax year”. This information should be shared regularly with your employees so they are aware of their obligations with regards to any tip payments they might receive.

Employer obligations with Tips

A lack of legal instructions to direct employers on how to handle tips has made it difficult for employers to determine where their responsibilities lie with handling tip payments to employees. With the above rule in mind, it is easy for employers to be dismissive of tips as it would not fall under their responsibility. However, it is recommended that employers disclose to employees how tip payments should be handled, including tax obligations. It is good practice for employers to communicate this responsibility to their employees.

Important Points to Remember

• Tips are considered gift payments that are a direct transaction between the customer and your employees;
• Employers are not liable for tip payments. While tips are separate income to what you pay your employees, they are still liable to pay tax on extra payments received through tips; and
• As an employer, you should guide your employees to take the appropriate steps to pay tax on any extra payments they receive through tips (if applicable).