What are the Most Popular Tip Out Structures in Restaurants?

While a restaurant manager wears many hats throughout a typical day, one responsibility they must prioritize for workforce morale is optimizing tip management. You must nail your tip allocation strategy, making it as fair as possible for front-of-house and back-of-house staff so that they feel their efforts are fully validated.

Restaurants use various tip distribution strategies to appeal to their workers, whether it be tip sharing, tip pooling, or other ways to determining how to distribute tips fairly. While no restaurant tip is automatic, there will be days after a long shift where your workers are pulling in huge tips, and you’re scrambling to figure out who should get what. Having good tip management software helps. However, if you don’t have a firm strategy in place, there are four popular tip-out structures you can model your approach after to appeal to your workforce.

Everyone Keeps Their Earnings

Workers keep what they make with this model

This is as simple as it gets as a tip management strategy. Managers rule that all workers keep the tips they have accumulated and are not required to share their tips with co-workers. It’s an every man/woman for him/herself type of strategy that can be both beneficial and detrimental to the workplace environment.

The upside of this strategy is that employees have to work harder for their keep because their compensation is directly tied to the work they do during each shift. Not only does this improve motivation among staff, but it also improves a manager’s chances of retaining the most successful employees because they don’t have to share their well-deserved earnings with others.

The drawback, however, is that there’s less teamwork among service employees. Also, novice employees are unlikely to earn more than a few tips, giving them no real incentive to stick around.

Even Split-Tip Pooling

Tips are evenly distributed in this model

This tip distribution method combines every employee’s tips, then splits them evenly between tipped wage staff members. The ‘even’ part depends on the variables, whether it’s based on hours worked or another factor when determining how to calculate tips. Smaller restaurants, in particular, opt for this type of tip distribution method as servers aren’t assigned sections or tables. Managers can use tip pooling software to help them figure out the facts and figures.

Even splitting can encourage greater collaboration among employees. Additionally, it’s equitable because some tips are more tied to the generosity of guests rather than performance. This can be demotivating for big tip earners as they lose out on money they feel was deserved.

Sectional Tip Pooling

A different tip pooling method managers use is split tips depending on the section or department. This means that servers in different dining rooms, for example, can determine how to fairly distribute tips among each other. Or, servers and bartenders can each receive a percentage of the tips while figuring out how to calculate tips.

This tip-out model is arguably better as it splits tips among smaller groups, ensuring servers keep more of what they earned. Though this tip-out method may spark some competitive drive among staff, it’s an automatic tip sharing method that encourages collaboration on a smaller scale.

Hybrid Tip Pooling

Here, servers typically keep a particular portion of the tips they earn while sharing the rest of their tip money. Though it’s another method that high tip earners may frown upon, it’s an equitable tip pooling method, utilizing tip distribution software to ensure all servers keep the tips they earned while rewarding high earners for their performance. This type of tip pooling strategy subsidizes less experienced servers or servers that receive little to no tips from certain customers.

Some restaurants will add between 15 and 20% of their totals to the bill, listing it as a service fee, with restaurant owners subsequently determining how to distribute tips fairly.

How Can You Implement the Right Tip Out Structure?

Whether you’ve decided on tip sharing and the right tip sharing software to administer it or opt for one of the aforementioned tip pooling strategies, you need to ensure the elements of your strategy don’t get lost among your employees. Communication is vital. Be as transparent as you can be about the tip distribution structure with your staff. You can do this by hosting a team meeting and explaining the parameters of the strategy. Include elements of the tip management strategy in your employee handbook as well.

Also, use your tip distribution software and other tech tools to determine how much your strategy affects performance. Examine your point-of-sale system’s sales/employee reports to see if the strategy boosts performance or negatively affects it.

Make sure the strategy you use is easy to track. For example, you could use a 10-point system for your tip pooling strategy, splitting the points among servers, bartenders, and bussers.

Optimize your tip sharing or tip pooling strategy thanks to TipHaus and improve your workplace atmosphere. Book your demo today.