Gratuity

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

Ad disclosure

Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >

Often referred to as a tip, this is a sum paid without obligation for services rendered. It is normally taxable in the hands of the recipient. In some industries, e.g. cab driving, catering or hairdressing, gratuities are an important source of income and basic salaries may be adjusted accordingly. The term is often used for lump-sum payments on the termination of employment, misleadingly in the case of the Armed Forces where such payments are actually contraded for. In the hotel industry, a charge may be added to the bill, supposedly in lieu of gratuities. This is known as a service charge, and is divided amongst the hotel staff much as prize money was divided in the romantic days of British naval supremacy.

Reference: The Penguin Business Dictionary, 3rd edt.