What’s the best way to change a tip-out policy?

tip jar
Make tweaks to tip-out policies very sparingly, Advice Guy says. | Photo: Shutterstock


In the last year, the managers at the restaurant I work for have changed our tip-out policies three times. As of now, we are to bring our own cash to every shift and be prepared to tip out the bartender at the end of every shift. Our credit card tips go on our checks weekly. Is this legal?

– Server; La.


With any change to the tip out percentages of an operation, there are winners and losers. There is only one pie (pool) of tips, so the way it is divided cannot benefit everyone in the same way.

Often in an attempt to make things more equitable for some positions, operations tweak these percentages. Sometimes a few vocal employees who complain about the policy or threaten to go where the grass is greener prompt management to overreact, as seems to be happening in your operation. My advice is to make any changes to the tip-out thoughtfully, inclusively and infrequently.

To make these changes thoughtfully, look at past data and model what the new program would look like for each position in the restaurant. Is it truly fairer or does it just placate the whiners? To make these changes inclusively, engage all employees in the process and conversation and be sure they understand and agree to the proposed change. Give them advance notice of when the change will occur. After all, the tips are theirs and not the operation’s. And finally, make these tweaks very sparingly! More than annually is far too often.

As to whether you should be “fronting” tips before you receive them, the Tip Regulations Under the Fair Labor Standards Act (FLSA) document states that, “an employer that collects tips to facilitate a mandatory tip pool generally must fully redistribute the tips within the pay period.” My advice is that no employee should be out-of-pocket waiting for their credit card tips.

I’ve seen many front-of-house teams divided and dysfunctional over tip-out policies. Overall, my advice is always to prioritize growing the “pie” of revenue for the operation and all the employees rather than quibbling over the size of each piece. Easier said than done, I know.

As always, this column is not legal advice, and state and local regulations vary. Check with your attorney and restaurant association to be sure your tip pooling is compliant.

More on managing tip pools here.

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