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Can restaurant owners set aside tips to fund a holiday party for employees?

restaurant tips
The short answer is no, Advice Guy says. / Photo: Shutterstock

Question:

Occasionally I get tips when jumping in at the bar or taking a couple tables when we are busy or short-staffed. Over the course of a year, it adds up. I understand that [as an owner] I can’t be part of the tip pool but am keeping these funds aside and will put them towards a Christmas party and gifts for employees. Is that legal since the money will ultimately be going back to employees even though it was given to me?

– Owner

Answer:

No. Writing this column and having recently covered the ongoing question of under what circumstances managers and owners can be tipped (hint: almost never and only if directly and solely serving), I have heard every possible rationale for why management should be tipped: Servers can make more than managers, it is only fair since they are taking tables, costs are high, salaries are low, management has to jump in to relieve servers, and on and on.

While the rules may not make sense, and the system may be broken, that does not change what management can and can’t do with tips.

Tips given to management should go in the tip pool and be distributed the way other pooled tips are.

It’s a lovely idea to host a holiday party and offer gifts for employees. But those expenses too should be borne by the operation as expenses. The party and gifts can have a positive impact on employee retention, morale, and recruiting, but should not be subsidized by tips withheld from employees.

As always, consult with your attorney and restaurant association for the latest guidance and any applicable regulations in your region.

More on administering tip pools here.

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