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The Starbucks (NASDAQ: SBUX ) app may have made life easier for the chain's coffee-seeking customers, but letting people pay through it likely cut into tips for baristas -- the people who make your coffee. Since customers weren't paying with cash, they didn't readily have the handful of change or $1 bill that normally went into the tip jar.
The app -- available in Apple's (NASDAQ: AAPL ) iTunes store -- made paying easy and tipping harder. Now the company has decided to change that by adding tips to its popular digital payment system.
The improved app, which will be released March 19, lets customers tip $0.50, $1, or $2. That may seem like small potatoes, but with an increasing amount of Starbucks transactions going through the app the lack of a tipping feature may well have cut into barista earnings.
"With more than 11% of transactions a week now happening with a mobile device in our stores, and nearly 10 million customers currently using our mobile app, we're thrilled to make the digital experience even easier and more rewarding for our customers and partners," said Adam Brotman, chief digital officer for Starbucks."This update to the Starbucks App for iPhone is an important next step in digital innovation at Starbucks and one of the many ways we'll expand and improve our digital experience in the months to come."
How important are tips to Starbucks baristas?
Starbucks does not specifically say how much it pays baristas but Glassdoor.com, which tracks salaries based on surveying employees and former employees, pegs the average hourly wage for baristas at $8.80 based on 1,216 respondees. Starbucks employees -- even low-level ones -- are offered benefits and bonuses (depending upon hours worked). But with hourly wages not that much above minimum wage, tips are a major factor.
"I worked there for two years. I want to say I made between $40 and $80 in tips per week, but that was in a generous, wealthy area," said Lowell Greenblatt to the Fool via Facebook. Greenblatt said he worked around 35 hours a week.
He also noted that he made much more during the holidays, and he was very supportive of the new functionality. "A tip app would be great," he wrote. "Some of our regulars wished there was a tip function on the Starbucks app."
Starbucks' own research echoed the idea.
Digital tipping has been a top suggestion on MyStarbucksIdea.com, an online community for people to share, vote, discuss, and put into action ideas on how to enhance the Starbucks Experience, according to a press release.
"As more and more customers are using their phone to pay, they have also asked for a convenient and meaningful way to show their appreciation to store partners," said Cliff Burrows, group president, U.S., Americas and Teavana.
How tipping works at Starbucks
Which Starbucks employees are entitled to split the tip jar has been the subject of a contentious fight that has bounced around various New York courts. The crux of the dispute is whether baristas have to share their tips with shift supervisors. Managers and assistant managers don't participate in the tip pool.
"The really important part is that this is not a fight between baristas and shift supervisors," Shannon Liss-Riordan, attorney for the baristas told ABC News in June 2013. "It's a fight between baristas and Starbucks about who has to pay shift supervisors. Why employers want to spread tip pools around is to lower their labor costs so they don't have to pay as much to shift supervisors."
Starbucks has no official policy as to how baristas should split the tip jars among themselves, but one former employee explained via Facebook how it worked in her store.
"We pooled our tips and then divided by hours worked and everyone got the same amount per hour that they worked that week," said Julie Maccarone Souliotis.
This is a good move for Starbucks
Despite paying low wages to its baristas Starbucks, has a reputation as an excellent place to work. On Glassdoor 79% of of employees recommend the company to a friend and 88% approve of the performance of CEO Howard Schultz.
Starbucks also has a customer base that seems likely to be more concerned about issues effecting workers. Letting customers tip via the app does not cost Starbucks any money beyond the price of adding the technology to the app. It should result in more money for its lowest-level employees -- the ones who interact with customers the most -- without Starbucks actually paying them more.
Any move that improves employee morale and makes customers feel better without a large expenditure of capital is a winning one.
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