Splitting Tips: You Can’t Avoid It, So Here’s How to Do It

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Tipped employees like us bartenders have one thing on our mind and one thing only. And that’s the amount of tips we can make that shift. Sure, you might also be wondering when you’ll ever get the chance to leave the bar and use the restroom, but hey—that can wait, we’ve got bills to pay.

But there’s a monster lurking, and that monster is the tip out. Tip sharing can suck the life right out of your income.

Some bars and restaurants have decent tip-out policies, while others require you to give the busboy your firstborn child. No matter what situation you’re in, by the end of this blog you’ll better know how to navigate the world of splitting tips, tip sharing, and tip pooling.

U.S. Federal Laws and State Laws

First, let’s look at some tip pooling laws enforced by the Department of Labor.

  • Fair Labor Standards Act (FLSA)
    • The FLSA keeps employers protected. Here are a few rules:
      • Employers can’t keep an employee’s tip, ever. Managers and supervisors especially.
      • Non-tipped folks get paid full minimum wage and take no tip credit
      • Tip pools must be paid out within the pay period
  • Federal Minimum Wage
    • The minimum hourly wage for non-tipped workers sits at $7.25, according to federal laws. But this can vary by state. In places like Illinois and California, you’ll get a higher minimum wage. But for the waitstaff who get tips, the federal minimum wage is a whopping $2.13 an hour.
  • State Laws
    • Tip pooling is different than tip sharing (more on that in just a second). But if we’re looking at it through the lens of state laws as opposed to federal, tip pooling is outright banned in California, Oregon, and Minnesota.
federal-laws-for-tipping

Tip Pooling Policy vs. Tip Sharing

What is tip pooling?

Total tips are added up and then divided amongst the team.

What is tip sharing?

Tip sharing means you’ll make your own gratuity, but share a set percentage of it (sometimes higher for a job well done) with support staff.

  • Who You’ll Tip Out
    • Busboy, bussers
    • Dishwasher
    • Back-of-House
  • Who You Might Tip Out
    • Dishwasher
    • Back-of-House
  • Who You Won’t Tip Out
    • Managers
    • Supervisors

One seafood restaurant in South Carolina found itself in deep water when employees reported having to share their tip pool with their managers. The establishment ended up having to fork over upwards of $625,000 in back wages.

If you manage or own a venue, what’s your biggest fear of managing people’s money?

Business owners, if your ears perked up you might want to make sure you’re following all of the tip pooling laws and other FLSA rules. Local Bartending School can help you stay out of trouble by training you and your staff on local laws.

How to Split Your Tips

Why would waiters split tips? What are the pros and cons of splitting tips? Just two of many questions you might have.

In the industry, servers and bartenders split and share their tips with their teammates who help make them either complete their job or make it easier. 

For example, a bartender tips out the barback for cleaning glassware, keeping the trash empty, and sometimes even helping with water. In restaurants, a server might tip out a percentage of their sales to the busser, bartender, or host. This sort of tip out provides everyone with equal teamwork motivation to get the job done.

But what does splitting your tips look like? Veterans and course instructors at Local Bartending School tell us that usually, you’ll run your report from the POS and add up your total sales (food, beverage, or one of the other depending on who might be getting the tip out) and that number will be what you owe to the supporting staff. But, you can (and should!) tip more to your support staff for a job well done.

In the hospitality industry, management will usually handle distributing the tip money, but restaurant staff sneaking the busser an extra fiver for doing your floors is pretty common. 

Learn ways to earn more money from tips as told by industry experts.

Tipping FAQs

You might still have a few questions about tipping. Don’t worry, I won’t leave you hanging. The team at Local Bartending School has gathered a bit of insight for me to share.

What are the pros and cons of splitting tips?

When you have to split your tips as a server or bartender to support staff there’s some good and there’s some bad.

First and probably the most obvious, splitting tips sucks because you’re having to give your hard-earned money to another person. That’s the biggest con. Other cons include unfair tip-out policies, a chance for bias, and unreported income.

But, on the bright side, if you have a well-oiled machine, you can earn more money as a team, and splitting tips don’t matter because you’re money so much money, anyway. 

What is the tipping policy for parties of six or more?

Oh, the long-standing question of auto-gratuity. 

If you’re new to the industry, there’s a debate about whether or not to throw an automatic percentage of the bill toward tip or gratuity. Some countries have a service staff in place already. 

Have you worked or been abroad and noticed? Comment below, we’d love to hear your experience.

In the U.S., though, some restaurants leave fate up to the restaurant gods.

Yup, long story short the tipping policy for parties of six or more varies by the establishment.

What is the etiquette for tipping?

As service members, we know the etiquette for tipping—our livelihoods depend on it. But, that doesn’t mean the rest of the folks do. Here’s an article all about tipping guidelines they, and you might find useful. Share this with the world, so you can get 20% (plus!) all day, every day. 

Still don’t see the answer to the question you had in mind? Just send us a message on Facebook. You can also follow us there for all things bartending.

Owners, Here’s What You Need to Know About Tip Pooling and Tip Sharing

Bar and restaurant owners, tips are a never-ending world to your payroll process. And I can promise you one thing—if you mess up your employees’ tips, you won’t have employees for very long. So, let’s make sure you get it right and can keep your doors open.

For more on how Local Bartending School can help bar and restaurant owners, click here.

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Carrie Jean Lipe

Carrie Lipe has been writing creatively since childhood but jump-started her professional writing after college. She's an Indiana native, Ball State Hospitality graduate, and a bartender with over 10+ years in the industry. You can find her making basil Moscow mules when she's not writing. Follow her professional journey on Instagram! @contentbycarriejean

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