Servers, hosts, and bartenders are the food and bev staff who bring in the majority of bar tips after an evening of service. And with good reason: these pros have the most direct contact with guests and are ultimately responsible for ensuring customers have a good time and feel well cared for.
However servers couldn’t do what they do without the hard work and expertise of those in less visible roles around the establishment – from bussers, to delivery professionals, to line cooks, to the head chef. That’s why many bars and restaurants are now choosing to implement a tip-splitting policy to make sure everyone contributing to an excellent guest experience gets to share the love.
But tip calculations can be a complex and difficult calculation to make, especially as a nightly task in your bar. Legal considerations, questions of equity and fairness, and your exact tip-splitting methodology are each important factors which may change how you choose to handle this process.
If all else fails, you might try using a custom tip-splitting template to help you work through the details. If you prefer the long way around, here is everything you ever wanted to know about tip-splitting: what it means, how it works, and why you should use it in your bar.
What is a tip for a service worker?
Tax professionals at the IRS define a “tip” as a non-compulsory extra-salary (not part of their typical hourly or salaried rate) payment given by a customer to a service worker within the hospitality industry.
Tips may be given directly to the worker by the guest, or it may be distributed between employees via a tip pool into which all customer gratuities are placed. Tips can come in a number of different forms, including:
- Cash
- Additions to debit, credit, or other card- or digitally-based payments.
- Non-monetary tips, such as a gifted bottle of wine over a certain value.
Typically, the amount of tip given is calculated as a percentage of the overall cost of the food and/or drinks paid for during a customer’s stay. 15% is considered the minimum in many establishments for good service, with generous tippers leaving between 25 - 50%.
If the overall bill for a given group was $100, and they wanted to leave a 20% tip, they would calculate is like this:
100 x .2 = 20
20% of 100 is 20, so the tip amount is $20. The total for this bill overall including tip would then be $120.
Tip pooling laws
The U.S. Department of Labor (DOL) stipulates that employers can require tipped staff to share their tips with non-tipped staff only if all employees are being paid at or above the minimum wage rate: $7.25 federal, varied local.
The DOL also states that, if employees are tipped, an employer may take a “tip credit” up to a certain percentage out of a tipped employee’s hourly wage. The tip credit cannot exceed the actual amount the employee was tipped, and cannot exceed $5.12. The employer must also inform employees truthfully whether or not they are claiming the credit. If an employer chooses this route, they may not hold any tips or ask tipped employees to share their extra-salaried income.
If they ask tipped employees to share their tips with non-tipped employees, they may not take a tip credit.
Tip pooling vs. tip sharing for bar employees
The terms “tip pooling” and “tip sharing” are often used interchangeably, however they describe two different tip-splitting processes which may function more effectively depending on the needs of the establishment in question.
Tip pooling is…
Tip pooling is an employer-mandated process which is beholden to the DOL’s tip splitting laws outlined above.
With tip pooling, employees collect a certain number of tips which the employer then splits between both tipped and non-tipped employees based on a metric of their choosing. Most commonly, these are based on hours worked, an established points system, or defined hierarchies within the bar or restaurant.
Tip sharing is…
Tip sharing is a completely voluntary action which employees may either agree to or disagree to. It is not beholden to the DOL tip-splitting laws, and the system for splitting tips is often created collaboratively by employer and employees.
Because it is voluntary, some employers may choose to provide employees who do share their tips with added benefits or incentives.
Ways to share and pool tips in your bar
Here are a few bar tip formulas to help you implement tip-splitting within your establishment.
- By hours worked.
This weighted tip formula method awards a tip percentage to each employee which is exactly proportionate to the number of hours worked during their shift.
Let’s say for example that your bar staff collected a total of $2000 in tips on a busy night. Two employees worked 8 hours, one employee worked 7 hours, two worked 6 hours, and one worked 4 hours.
You can calculate this by adding the total number of hours worked, dividing $2000 by that number, and multiplying the outcome by the number of hours worked by each employee individually.
(8x2)+7+(6x2)+4=39
2000/39=51.29
51.29x8=410.24
‘’x7=358.96
‘’x6=307.68
‘’x4=205.12
- By points system.
This method assigns points to different roles based on the level of labor each is doing during a given night of service. Generally there will be a points total, representing the entire tip pool, and each employee will be entitled to a portion of that pool which is proportionate to their number of points.
You might choose to give bartenders 30 points each, barbacks 10, and bussers 5.
You will calculate tip payout for each similarly to how you calculated an hourly tip split above. Add total points together, divide the total tip amount by that number, and multiply the outcome by the individual number of points possessed by each for tip amount.
- Percentage tip-out.
This method asks tipped staff to give a percentage of their total collected tips to non-tipped staff. A certain percentage is usually calculated for each “support” role, including BOH and non-server FOH staff, which is generally ranked in a similar way to the points method.
An average points-system division looks like this:
Chef - 10%
Host - 12%
Busser - 7%
Etc.
In this example, the server would be asked to give a total of 39% of their tips overall to support staff, with 10%, 12%, and 7% going to the chef, host, and busser, respectively.
Provi can help to streamline your bar or restaurant tip pooling process
Provi is an all-in-one POS, ordering, and inventory-management platform made for bars and restaurants – and we really do mean all-in-one. Provi’s point of sale system keeps track of what customers are ordering and places that usage against your digital inventory to let you know when your most popular beverage is getting low. From there, you can place a single order to all of your many distributors at once with the click of a button. This saves you time on inventory so you can get back to providing winning customer service to your guests – or, more time figuring out which tip-splitting method works for your establishment.
Learn more about what Provi can do for you, today.
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