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How to assure proper tip outs

tip dish


Dear Advice Guy,

How can you ensure your servers are tipping out the appropriate amount? I work at a restaurant where the servers are expected to tip out 30% of what they make each shift. Then 10% goes to the bartender and 20% is divided among the Server Assistants. It seems that there are some servers who consistently tip out more than other servers who have worked here longer. Is there a better way or any way to monitor this other than basing it solely on trust?

– Emily, Mohegan Sun Pocono


First, let’s call this what it is: theft. You suspect that some servers are stealing tips (presumably cash) by not tipping out on the full amount of tips received. In pooled environments, the problem would not be entering all tips into the pool. This is a perennial problem in the industry and, as in many cases, I suspect you know who the culprits are.

Operations are often better with preventing theft from unauthorized comps, sales not making it in the POS, or abuse of voids than they are from this kind of theft since the victim is a coworker rather than the operation. However, condoning this practice allows for a toxic culture and, as you note, a broad feeling of distrust.

I’ve seen a few ways to manage this:

  1. First, make the tip-out policies clear and transparent.
  2. Collect cash tips as received rather than letting them accrue throughout the night. Management can track/manage as long as they do not assess a fee or participate in pooling or tip out.
  3. Record cash tips as received with the same regularity you would use to add a credit card tip to the charge.
  4. Be clear that cash handling guidelines in your operation apply to revenue from sales as well as gratuities.
  5. Management can do some analytics with some simple math based on tip records. If most servers have a fairly consistent 60% credit card, 40% cash tip distribution and one or two are consistently 80/20, it points to a problem. Similarly, if most servers are averaging 16% tips and one is at 12%, either you have an underperforming or a thieving server. Either way, it’s a problem to address.

Paul O’Neill, Front-of-House instructor in Drexel University’s Department of Hospitality and Tourism Management advises, “The one component missing from a POS system, which can be seen as problematic, is tracking cash tips. This is where a system of trust needs to be put into effect. I imagine that working in a casino, surveillance and appropriately handling cash should not be an issue. Either way, there needs to be more transparency on the part of everyone from maintaining a balanced tip-out system and making sure that supervisors fairly review the process with the tipped employees.”

IRS guidelines for keeping a tip record here

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