Aug 26th, 2022 | By David Tashjian
Spa and salon owners are bleeding out workers every day and hungry for ways to make things better for workers. As the labor shortage persists with inflation at an all-time high, owners are exploring the implementation of digital tipping solutions to retain employees for the long-term. Let’s explore the link between digital tipping, employee retention and why these have recently become companion words in the battle to offer more “sticky” benefits for employees.
Everyone wants to differentiate their business by providing the best services and value for their customers. But with the current labor shortage, owners must also turn their attention to their employees. New benefits can be costly and usually permanent. That’s where digital tipping comes in. Digital tipping has increased service professional’s tips by an average of over 22% with no additional cost to employers.
Offering this opportunity to potential new employees, is an obvious benefit that could make your business competitive for talented professionals. What if I told you that you could increase your employees’ tips by an average of over 22% for free? Yes, that is not only possible, but also a significant benefit for your employees, and it can’t be overlooked as you compete for hiring and retention.
A New Era of Technology
The spa industry must recognize the new age of technology business. Changes in the payments’ space have accelerated in recent years, aided by a global pandemic and the reluctance by consumers to carry cash. Mobile payments are now growing by 40% annually.
While it used to be the norm to tip service professionals with cash, it is becoming the exception. While payments for services and products have kept up with these changes (NFC, digital wallets, new digital rewards programs, etc.), they have left tips “in the dust.”
Your customers will always tip more when they know you know. When a consumer hands their service professional a $20 bill, they know their service professional knows what they are getting immediately. Thus, they tend to tip up. But, when they are adding a digital tip to a receipt, they no longer believe their service professional will know. They believe it will get lost in the POS and lumped into payroll anonymously. So, what happens next is pure human nature? The tips go down.
Modern technology provides solutions and new tipping companies have emerged to help. Owners must first recognize they are in the technology business, and then accept new payments’ technologies that embrace these changes in terms of services, products and also tips.
These new solutions have emerged to bring the personalization of tipping to digital payments. Some even have the added benefit of saving processing costs on the tips. In summary, employing modern tipping technology can be a significant tool in aiding both hiring and employee retention.
Picking the Right Platform
When it comes to picking the right solution for your business, there are a few consideratiosn to keep in mind.
1. Personalization. The solution must somehow let the customer know you know. This is imperative in getting that 22% plus boost in tips. The solution needs to combine the personalization of tipping with the convenience of digital payments. The customer needs to know that their service professional is being told instantly of their first name and the tip amount. Some of these solutions are embedding photos of the service professional in the payments’ screens for the customer.
2. Customization. Some solutions are simply “tip delivery systems.” These are provided by payroll companies. The more robust tipping solutions provide customized tipping screens for the customer with pre-determined suggested tip amounts. Be sure you choose the later or you’re only accomplishing half the goal. You will be able to get the tips to your employees instantly, but without the embedded tipping software tips will not increase, and may actually go down. Be sure you have the option to easily customize the suggested percentages and amounts.
3. Instant. Service professionals are used to walking out the door each evening with their cash tips. Look for a solution that provides instant funds to the service professional even when the customer is paying digitally. Some solutions provide instant or same-day payouts, but only at the expense of the owner by requiring working capital “float” accounts and daily fees per employee. Be sure to choose a solution that floats the tips to employees instantly without tying up the working capital, and with no daily charges.
4. Employee Mobile App. For robust functionality, the solution needs to include a mobile app for employees. This app should include instant tip notifications (customer’s first name and tip amount), a full history of tips (at least 12 months), and ways to analyze. Tipping can be 20-30% of their income, so it’s time to provide them the digital tools to follow and manage.
5. Employee Digital Wallet. There are various digital solutions in the marketplace today for instant delivery of tips. However, keep in mind, they are not all the same. For example, some are offered by payroll companies with prepaid cards and hidden fees. They have been built as an adjunct of payroll and don’t take into account all the new possibilities available to benefit your employees. These include free ATMs nationwide, cash-back and rewards programs, early and free payroll advances etc.
6. Free Processing. Finally, be sure to choose a solution that offers processing savings on all tips. This can save an average salon over $2,000 annually and can make a big difference to owners!
These details are all very important considerations to think about when selecting your digital tipping solutions. Your customers are carrying less and less cash. As you provide more convenient payment methods, be sure not to leave your employees tips “in the dust.” You owe it to both your business and your employees to seek these new tipping technologies. Both their happiness and your bottom line will increase – and for once both can happen together!
David Tashjian is CEO and President of Tippy, a digital tipping solution built for industry professionals by industry professionals. In 2015, he helped found DirectTips and its flagship technology platform, Tippy. Tippy’s disruptive technology offers a suite of tools reducing business owners’ processing fees and improving service providers’ tips, helping them to meet and exceed financial goals. For more information, visit MeetTippy.com.