Introduction The concept of compensation refers to the various forms of financial and tangible benefits given to employees in return for their work. Usually, compensation is part of any employment relationship and is important to both the employer and employees. In the hospitality and tourism industries, most jobs are poorly remunerated in relation to other industries. The poor remuneration often gives rise to the low status ascribed to these industries. Despite the poor remuneration offered in the hospitality and tourism industries, employees working in these industries enjoy lots of ‘grey economy’ benefits such as subsidized or free food, accommodation, clothing, and travel (Allan, Bamber and Timo, 2006). Main body Obviously, there is an endless debate about the morality and efficacy of this culture of ‘grey economy’ benefits that are inherent in the hospitality and tourism industries. Generally, the notion of ‘grey’ benefits is important in the hospitality and tourism industries in a number of ways. ‘Grey’ benefits allow poorly remunerated workers to augment their salaries and hence these benefits contribute positively to employee job satisfaction and emotional wellbeing. In addition, tipping can be used as an indirect management tool for controlling employees in employee-customer interactions. Tipping can also be used to suppress employee interests and participation in more collective powers such as trade unions (IDS, 2006). According to De Cieri and Kramar (2003), most customers use tips as a means of enticing employees to give them the best treatment. In this case, the company might not be concerned with the practice of tipping. The Labour Research Department (2007) has hailed free meals, clothing, and accommodation as an indirect form of flexible work arrangements, which entice employees to increase their productivity. As such, ‘grey economy’ benefits contribute to employee empowerment and do not necessarily taint the service industry. IDS (2006) sees institutionalization of ‘grey economy’ benefits in the service industries as distasteful and has strongly denounced the practice of using these benefits to boost poor remuneration. IDS (2006) feels that employers in any industry should remunerate their employees fairly in order to court strong loyalty and increased productivity instead of leaving it to customers to tip employees. Moreover, some ‘grey’ benefits such as tipping weaken employee-customer relationships as interactions between the two become merely economic exchanges (De Cieri & Kramar, 2003). Additionally, tipping increases power differences as in the case of menial jobs where it reinforces the low status of tipped employees. Allan, Bamber, and Timo (2006) have looked at the issue of fiddles and knock-offs in relation to other aspects of reward packages in the service industries. They say that fiddles and knock-offs are acts of dishonesty although the individuals involved in these practices do not consider them dishonest. As such, these practices cannot be considered genuine supplements to the employees’ poor remuneration. Generally, fiddles and knock-offs are institutionalized within organizations but are to a great extent depende