It's common sense, to most at least, that tipping and restaurants go hand in hand. Guests at restaurants in the U.S. almost always understand their "expected" to give an additional amount on top of their check total as a "thank you" for a good dining experience and service.
But collecting tips from guests is only the first part the equation for restaurants and bars. The next step is to figure out as a restaurant owner or manager how you want to distribute the tips back to your employees. Here, we'll discuss some ways you can go about tip-outs at your business.
Learn more about minimum wage and the legality behind tipping in Backbar's Minimum Wage Guide.
Types of Restaurant Tip-Out Methods
There are three big ways to handle tip-out within a restaurant or bar:
- Tipped employee keeps their tips: This one keeps it simple. Whatever tips the employee makes during their shift, they get to keep.
- Tip pooling: A group of tipped employees group their tips and split them, usually evenly, at the end of a certain time frame.
- Tip sharing: A group of tipped employees contributes a portion of their tips to non-tipped employees. This is most common in full-service restaurants where servers have a support team, such as bussers and food runners or bartenders who have barbacks.
Keeping Tips Method
This is the easiest way to handle tipping at a bar or restaurant. With this method service staff simply walk with 100% of the tips they made during their shifts.
At the end of each tipped staffs' shift, they should be required to drop off their checkout ticket with all their sales information. A manager should then record their total tips for the shift (credit card and cash) over $20. Then the server gets to leave with a cash amount of all the tips they received.
Your POS system should record all this information. But, it's each restaurant's responsibility to have some system in place to manage all this data and report it to the accounting manager.
Tip Pooling in Restaurants
In a tip pooling method, the servers contribute anywhere from about 20-100% of their tipped earnings to the "pool" and then it's the managers' responsibility to redistribute tips between all eligible staff. Most service staff vets are accustomed to servers working independently to earn their tips. But, tip pooling can help create a less competitive and more collaborative work environment.
This method encourages service staff to work together to make sure all the tables are receiving exceptional service and not just the ones in their section. Whether you choose to evenly distribute the tips or do a weighted system, tip pooling provides additional opportunities for strengthening teamwork and increasing productivity.
Another bonus for pooling tips is alleviating section and table drama between servers. Sometimes your veteran servers may feel slighted if they don’t get the “best” section, while new servers want the opportunity to show off their skills and earn the most tips. Also, mistakes happen, and servers may accidentally take a table in the wrong section. With pooled tips, this situation becomes basically a non-issue. Everyone is equally rewarded for their work — and you won’t have to mediate any disagreements.
On the con side, it's harder to get insight into how your servers are performing individually. And, of course, there is the potential that your top-earning servers may feel like they’re losing out on money they earned under a tip pooling system.
Restaurant Tip Pooling Calculator
There are a few different ways you can go about distributing the cash in a tip pooling system. Let's look at the most popular options:
Hours Worked Tip Pooling
As a manager, it wouldn’t be fair to allocate the same amount of tips to someone who worked 3 hours as someone who worked 7 hours. So it is important to keep in mind when dividing tips that employees often work varying numbers of hours. So, you’ll want to factor in hours worked when doing any calculations.
If you want to split tips based on hours worked, you'll need to add up the total amount of tips and then divide that number by the total hours worked by all employees. Next, multiply that total by the hours an individual employee worked.
For example:
Total tips = $700
- Employee A hours worked = 9
- Employee B hours worked = 10
- Employee C hours worked = 6
Total hours worked=25
700 (total tips)/25 (total hours)=28
So:
- 9 x 28 = $252
- 10 x 28 = $280
- 6 x 28 = $168
Points System Tip Pooling
Another common way that tips can be divided is through a point system based on the different positions within the business. This allows you to assign weighted amount of points and allocate more tips for certain positions. This allows servers and bartenders to receive a larger share of tips than positions like the busser.
For example:
- Server = 30 points
- Bartender = 15 points
- Busser = 5 points
Divide the total number of tips (let's say it's $1,500) by the total number of points (in this case it's 50) and you’ll get the worth of each point, which for this case is $30.
Next, multiply each staff member’s number of points by $30.
So:
- Server = $900
- Bartender = $450
- Busser = $150
Tip Sharing in Restaurants
Most servers are familiar with “tipping out,” or sharing a percentage of their tips with bartenders, hosts, and other support staff. Generally, for tip sharing, the servers tip out based on a percentage of their sales. For example, the bartender may earn 5% of alcohol sales, while hosts and bussers earn 5% of food sales.
With this method you allow servers to keep the majority of their tips which can incentivize them to offer their best customer service to guests in their sections. Hosts, bartenders, and other support staff also feel invested in creating positive guest experiences and working efficiently and accurately because their extra tip-out depends on the guest's appreciation of their experience.
However, this method may cause more competition between servers for better sections and ideal shifts.
Restaurant Tip Sharing Calculator
Tip Sharing Percentage Tip-Out
An option is for servers to tip out supporting staff a specific percentage of their tips. This percentage is usually set by the manager and is non-negotiable. Typically, the bartender will receive 10% and another 25–30% will be split amongst the remaining staff.
For example:
If a single server has a total beverage and food sale of $1000 the distribution can go as follows:
● Runner - $10 (6.7%)
● Busser - $20 (13.3%)
● Bartender - $15 (10%)
●Hostess - $8 (5.3%).
● Server's take-home total after tip-out - $95.20 (63.5%)
In some restaurants, a $1.80 (1.8%) tip charge has to be returned to the restaurant to cover the fee the bank charges them per $100 of tips.
