Gratuities paid by consumers are widely used to compensate workers in the service industry despite the fact that this practice permits and even encourages a variety of negative practices - from customer-employee collusion against the interests of the firm to service discrimination against consumers thought to be poor tippers. Such negative effects of tipping raise a question about why it exists - what benefits (if any) do firms receive from tipping to justify this practice? One common explanation for tipping is that it is the most efficient way to provide service workers with performance-contingent rewards and to motivate them to deliver good service. In this paper, we draw upon the attraction-selection-attrition model to describe and test another benefit to firms of this practice, namely that it helps to selectively attract and retain better service workers. Data from a survey of restaurant servers support this selection effect. Concluding discussion calls for more research on this interesting and understudied form of employee compensation.