When you tip at a hotel, where’s the money actually going? Often, this varies by location. In some places around the world, it’s common for service charges to be considered tips and pooled to be distributed to staff. In other places you can be pretty confident that tips are going to the person intended.

But not everywhere! There are countries where the tipped employee probably has to ‘kick up’ to a supervisor. And there are sketchy hotels that are keeping a portion of the tips for themselves! I’ve wondered if that’s especially true where QR codes are in use for tipping?

• QR codes finally found a use case during the pandemic. They were invented way back in 1994 by Denso Wave, a Toyota subsidiary, and used for tracking automotive components in manufacturing. They never quite took off in consumer use. Early smartphones didn’t have built-in QR scanners, so using them required extra steps and there just wasn’t a compelling reason for mainstream consumers or businesses to adopt them. Businesses and consumers had no strong push toward digital, contactless interactions until COVID-19.

• We started seeing QR codes for menus and various other applications. Hotels started using them to encourage tipping, which in turn allows them to pay workers less.

• QR code tipping is often a service provided by a third party. There isn’t just a credit card processing cost to the hotel there’s also a service charge from the provider.

Tipping via QR code has spread in hospitality so that you now may find QR codes for tipping the front desk staff who checks you in, not just housekeeping. There are also now airport hotels that encourage tipping the shuttle driver via QR code.

The Orlando airport Hyatt House and Hampton Inn & Suites share a shuttle, and encourage “tip with Zelle using QR codes.” According to a shuttle driver, though, they do not receive all of the tips. The third party provider being used, Grazzy, reportedly keeps 11% of whatever guests tip.

• Most QR-code tipping systems are run by third-party payment providers.

• These providers typically charge fees similar to credit card processors—often around 2–3% per transaction (sometimes with an added flat fee per transaction). While the rate varies by vendor, volume, and contract details, I’m floored by 11%.

• In most cases, the hotel absorbs the processing cost! While I’m not a labor lawyer, generally the Fair Labor Standards Act treats tips as the employee’s property once received from the customer. This means an employer isn’t allowed to deduct any business expense—including credit card processing fees—from the tip amount.

  The full tip must go to the employee, and any fees incurred from processing credit card transactions must be absorbed by the business.

• Various state laws (like those in California and New York) generally mandate that tips are the sole property of the employee as well and impose greater restrictions, but in no case can a state relax the requirements of the federal FLSA. Employers are prohibited from taking a share of those tips—even to cover processing costs.

The practice of tipping already helps hotels because they retain workers, and they’re able to do so without paying more. The employee gets the income, whether it comes from the guest or the hotel. Keeping a share of it strikes me as especially shady.

I would expect major companies to understand and follow better practice. It would not surprise me that small franchisees might not. They might be unaware of the law and just think that of course they should only pass onto the employee the net amount, believing they shouldn’t have to pay a cost to cover tips.

It appears that the Hyatt House Orlando airport is owned by McKibbon Equities and managed by McKibbon Hospitality. McKibbon lists the Hampton Inn that shares this shuttle as one of their properties as well. Assuming that the employee’s explanation is accurate, they seem large enough to know better.

I’ve reached out to McKibbon Hospitality for comment and will update if they respond.