manager collecting and distributing tips after a shift

Tip Pooling Pros And Cons: The Complete Guide For Restaurants

If you’re wondering whether tip pooling can benefit your team and your restaurant, you’ve come to the right place.

In this article, the restaurant-management experts at Sling give you the pros and cons of tip pooling so you can decide if it’s good for your business.

What Is Tip Pooling?

Tip pooling is the process of collecting all tips from servers and other tipped staff together in one lump sum and distributing that money in a certain way so as to reward and inspire the hard work of those who contributed to the customer experience.

The concept of tip pooling is fairly simple — the equitable distribution of tips based on a predetermined system to everyone from prep cooks to hosts to food runners.

Dividing up that pool of tips, though, is where things get complicated.

Many managers wonder how they can sort the money fairly to reward the different levels of work done by employees in different parts of the restaurant (e.g., front of house versus back of house).

There are many ways to distribute the tips in a reasonable manner, including these three common methods:

  • Hours
  • Points
  • Percentage

Most systems of division work by assigning weight to the participation of the various jobs that contribute to a successful customer experience.

So, while the servers do the lion’s share of the work, the hosts, bussers, and bartenders also do their part to ensure that the customer enjoys their time in your restaurant.

Not sure what weight to assign to each position?

Here’s an example from the points system — the hours and percentage systems work in a similar manner — to help you understand how it works and decide for your restaurant.

Tip Pooling Using The Points Method

calculating tip pooling

For this simplified example, servers receive 15 points, bartenders receive 10 points, hosts and bussers each receive five points.

Your restaurant may have more positions involved, and, thus, would distribute points in a different way. Regardless of how many positions you have, the ones who do the most work get the most points.

During one shift, customers tipped $1000 for three servers, one bartender, one host, and one busser. To figure out who gets what, add up the total number of points for the shift.

Servers (3×15=45) + Bartenders (1×10=10) + Host and Busser (2×5=10)
45 + 10 + 10 = 65

Next, divide the total points by the total tips to find out what each point is worth.

$1000 / 65 = $15.38

Now, multiply each employee’s points by $15.38 to find out what they receive from the tip pool.

Servers (15 x $15.38 = $230.76 each)
Bartender (10 x $15.38 = $153.80)
Host and Busser (5 x $15.38 = $76.90 each)

Before distributing the money, add up the various increments to make sure they equal the total amount in the tip pool.

$230.76 + $230.76 + $230.76 + $153.80 + $76.90 + $76.90 = $999.88

As you can see, there’s a little bit left over ($0.22 in this case) because of rounding errors, but the remainder should seldom be more than a dollar.

Feel free to give each person $0.03 more, or perhaps put the difference into another jar earmarked for an employee party or some other reward.

Is Tip Pooling Legal?

Customer handing server cash

Yes, tip pooling is legal. But you can’t just conduct it any way you want.

The Fair Labor Standards Act (FLSA) — which governs everything from a fair workweek to minimum compensation — sets rules and standards that all businesses must follow if they want to implement a tip pooling procedure.

Additionally, some states add their own rules to the FLSA standards. Other states have disallowed tip pooling altogether.

Be sure to check your secretary of state’s website to find out if tip pooling is even an option for your restaurant.

Then check the FLSA and other sources to find out what you can and can’t do if you want to implement tip pooling in your business.

Pros Of Tip Pooling

Server pouring champagne

1) Improved Teamwork

With tip pooling, your employees quickly realize that they are all in it together.

As a result, teamwork and group cohesion improve because everyone knows a good customer experience usually results in a higher tip and more money in their pocket at the end of the day.

2) Staff More Likely To Help Each Other

Similarly, tip pooling motivates every employee, regardless of their position, to help their coworkers when the need arises.

So, for example, a host helping out with the busser’s duties when things get busy, keeps everything running smoothly. When that happens, guests will be happier and more likely to tip accordingly.

3) Fewer Disputes Over Table Assignments

Table assignments can cause bad feelings and disputes among servers that have a direct effect on the rest of the team.

With tip pooling, there are no “bad” tables and no one feels slighted because they have to work the corner near the kitchen door.

4) Increased Sense Of Responsibility At All Positions

With tip pooling, all positions experience an increased sense of responsibility because their actions can have a direct effect on the amount of tip they’ll receive at the end of the shift.

As with the other pros on this list, that’s good for your customers, good for your team, and good for your business.

5) Equal Attention To Side Work

During busy times, side work such as keeping entryways clean and ketchup bottles filled takes a backseat to getting customers seated, served, and out the door.

But, with tip pooling, employees know that their tip depends on the total experience, so they’re more likely to give this side work the attention it deserves — even during the lunch and dinner rush.

Cons Of Tip Pooling

high-performing employee pouring a drink for bar customer

1) High Performers Take Home Less

One of the main cons of tip pooling is that high performers take home less than they would normally.

They may have worked hard to perfect their skills and give their customers stellar service, but they still make the same amount in tips as another server who doesn’t put forth the same effort.

2) Resentment Could Develop With Tip Pooling

Many employees will work hard under the tip pooling arrangement. Other employees may see it as a way to do a bit less work and still get paid the same.

If that happens in your team, the hard workers could start to resent the whole process and start looking for employment elsewhere.

3) Possibility Of Unfair Distribution

As a manager or owner, you know which positions are primarily responsible for a good customer experience.

Still, there is a very real possibility that you might assign less weight (e.g., fewer points) to more-involved and integral positions and more weight (e.g., more points) to less-involved positions.

This can lead to unfair distribution of tips and a sense of ill will among those who work the hardest.

4) Low Performers Aren’t As Obvious

With tip pooling, low performers aren’t as obvious — they don’t stand out as much — as they would be under a different system.

This can cause problems when it comes time for employee reviews because it’s hard to tell who has improved and who hasn’t.

5) Some Staff May Pocket A Portion Of Their Tips

If employees feel unfairly treated under the tip pooling arrangement, they may pocket a portion of their tips rather than contributing it all to the collection.

This is especially common with cash tips and leads directly to unfair distribution of money among employees.

Tip Pooling And Scheduling

Sling app for scheduling

Whether you choose to implement tip pooling or not, the success of your business depends, in large part, on how well you schedule your employees.

The Sling app can help.

Sling is a suite of tools that gives you unprecedented control over all your workforce management and optimization activities, including:

Time tracking and reporting
Payroll calculation
Strategy implementation
And much more…

Sling even incorporates advanced artificial intelligence that warns you when conflicts exist and provides suggestions for how you can fix them.

All of that makes Sling the best choice for managing your team’s schedule, keeping your employees engaged and focused, and making your business run better than ever.

For more free resources to help you manage your business better, organize and schedule your team, and track and calculate labor costs, visit today.

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