A tip pool, in the service industry, is a collection of gratuity given to food service staff. These pools include servers and other staff such as bussers and bartenders. The pool combines all tips received by employees and redistributes them among colleagues. These pools are used in some high-end restaurants to compensate for low wages; however, there are legalities surrounding their use. A restaurant tip pool can be tricky, especially since most states do not allow owners or managers to participate. If you own a business that hosts these types of events it will be helpful if you understand how they work and whether your state allows them.
Restaurant tip pools are also known as "tip-outs" or "troncs". The rules and regulations vary from state to state, but in general managers and owners of a restaurant cannot participate. It is against the law for them to take part in any tips that might be redistributed among staff. These laws also apply if your business receives gratuity through sit-down restaurants, buffet service, drive-thru orders, or catering services.
Typically a tip pool is an agreement between servers and the establishment. The details vary from state to state, but in general, all tips should stay with staff members who help provide a good dining experience for customers. Managers and owners are not allowed to take part in those gratuities. In some instances waiters can be required to pay back 3% over the standard 15% tip that they would normally receive as a tip-out or serve as many hours as another server or busser would work that week as recompense if their "tip out" is not enough.
Servers have been known to share tips with support staff such as busboys, barbacks, runners, food runners, and other chefs on duty. A tip pool must be fair and equitable. Waiters serving at fine restaurants earn higher tips than those working in casual dining establishments because they are expected to provide superior service. If the bosses take part in that increased tip, it is an unfair practice.
Restaurant tip pooling is legal if the establishment does not claim its share of gratuity. This means that any restaurant can require servers to give back 3% of the total tips if they do not make their minimum wage for the week, even though some states allow them to keep 100%.
Aside from this, managers and owners cannot take part in mandatory tip pools. When working out an agreement with your colleagues, remember there must be a fair system so nobody feels cheated or unappreciated. The big question on everyone's mind is whether it's okay for employers to take money from waitstaff's pockets. The answer is no; you must pay at least the federal minimum wage, which means the employer cannot claim any tip money. For example in California, if you receive less than eight hours of work in a day then your employer is not entitled to any tips that you might have received.
When allowed by law, restaurant owners are required to report their share of gratuity when they file taxes. For example in New York state, employers must pay tax on all employee-earned tips. If this isn't done and reported properly the government will get involved and assess penalties for underpayment of payroll contributions and income tax withholding.
Published by Steven J. Weiss