SOP – Tips and Gratuities

distribution in Hotels
SOP Number: F&B – 36

Department: Food and Beverage Service – General

Date Issued: 07-Aug-2014

Time to Train: 30 Minutes

Purpose:

Tips distribution is to be done every month / bi-weekly by the

Captain accompanied by any of non Management Team Member to
attest and witness the counting of tips. 

This procedure is a supplement of the Human Resources department

general tips policy and must be followed and adhered to by all
concerned Team Members of the hotel.

1) Collecting and recording of Tips from outlets:

 Collect the tip box from each outlet Eg. Coffee Shop, IRD,
Specialty restaurant etc.
 Record the total amount of tips received on to the register.
 Tips are counted every 15th and end of the month.
 Count the tips in the pantry or back office .
 If there is any foreign currency or chips on the Tips box then
change them in exchange for cash.
 When Team Member exchanges Foreign currency or tokens
into cash at the Team Member’s Bank, the below information is
required in the bank record:

1. Name and ID number of the Team Member receiving the tips

2. Date/ Time
3. Amount of chips being cashed
4. Team Member’s signature
5. Bank Cashier’s signature
  Captain must be assisted by one (1) Non- Management Team
Member when counting the tips.
 No cash are to be taken out of the property without the
approval of the Department Head.
 Both the Team Member receiving the tips and Manager will
sign in the logbook acknowledging receipt.

2) Captain/Assistant Manager prepares the monthly Tips

Distribution Sheet.

3) Distribute the tips to all concerned Team Members.

 Choose a quiet period (when restaurants are not busy) to

distribute the tips.
 Normally 25% of the tips is shared with the kitchen staff and
rest with F&B staff.
 The tips will be shared equally by all full time employees
 Management is ineligible to accept tips.
 Show the Tips Distribution Record to all Team Members.

4) Ask the staff to sign the Tips Distribution Sheet after

receiving their share.

 Staff should double check the tips received before signing.

 Tips distribution must be witnessed by the Supervisor and/or
Duty Manager and a Team Member.

Training Summary questions:

Q1. What is the purpose of tips distribution?

Q2. What all details to be recorded when staff exchange foreign

currency and chips?

Q3. Normal percentage of tips shared with kitchen staff?

Q4. Is manager level staff eligible of tips?

Q5. What is the appropriate time to distribute tips?

What is a Tip Out?

In restaurants, a tip-out occurs when someone in a heavily-tipped role shares a

portion of their tips with other tipped employees. Tipping out distributes gratuities
to everyone eligible to receive them.

For example, guests who leave a $20 tip at a restaurant might assume the entire
amount goes to their server. However, servers are not the only ones contributing to
a guest's dining experience. A tip-out ensures that their co-workers in the front of
the house share in gratuities, such as

 Barbacks
 Bartenders
 Bussers
 Food runners
 Hosts & hostesses.

In this example, the server might keep $10 of that $20 tip, with the bartender
receiving $4, the runner receiving $3, and the busser, barback, and host each
receiving $1.

The main benefit of tipping out is that more employees can be considered tipped
employees. In most parts of the country, restaurants may pay an hourly rate lower
than the minimum wage if the difference is made up by tips.
The difference between the tipped hourly rate and the actual minimum wage -
known as the tip credit - must be met or exceeded by gratuities so that employees
receive the full minimum wage to which they are entitled. If not, the restaurant
must make up the difference.
Types of Tips

Restaurants can receive multiple tips if they accept multiple types of payments.
Although cash types have always been the most popular option, digitalization and
paying by card are more common. Here are different tips that a restaurant or cafe
can receive:
Cash

A tip jar next to the POS system has always been a classic option at your favorite
cafe. When dining at a restaurant, patrons are most accustomed to leaving a tip on
the table after paying. Cash is the traditional way of leaving a tip, which is how
most people are used to paying for a tip. Of course, cash tips must be manually
counted, which will take extra time and energy.

The tip jar is a low-tech way of accepting and processing tips; it's free, simple, and
does not require additional software. However, the drawbacks of cash tips are that
they can be miscounted, get lost, or stolen more easily. Additionally, if you only
accept cash tips, you may receive fewer tips if your patrons only have credit cards.
Tippy has a stint as a thespian. Read more Adventures of Tippy comics.

Credit Cards

Paying by credit card and digital wallets have been steadily taking over paying
with cash. Pulling out a card, tapping to pay, and then quickly selecting a tip option
is straightforward. For patrons paying tips via credit card, they no longer need to
calculate the tips themselves, as payment software does the work for them. A
receipt or a tablet will list recommended tip percentages and the dollar/cent
amount, or a “no tip” or “custom tip option.”
Auto-gratuity and Service Charges

Automatic gratuity & service fees are often when a large group comes into your
restaurant and requires extra service and attention. Your restaurant can determine
what size would require this auto-gratuity or additional fee; often, it starts at six
people. It often makes the most sense to require an automatic 18 to 20-percent
gratuity. Some restaurants may opt to add a flat service charge for large parties,
too.

Tip Out Methods and Systems

There's no one-size-fits-all approach to how tips are paid out. But your restaurant
must adopt a method that works for your team, lest you'll impact staff retention and
morale.
Comparison table
Who
receives
Type tips Pros Cons Best for

Servers,
Tips paid to sometimes Possibility of an Full-service
those who other FOH Incentivizes uneven tip out restaurant, fine
collect staff servers and wage gaps dining
Some staff may
Even and fair, not hold Cafes, breweries,
provides themselves to a some full service
Even tip All eligible camaraderie high standard of restaurants,
splitting staff amongst staff service casual restaurants
Takes away a
considerable
portion of Casual
Ensures that BOH server's share restaurants, fast
staff receives a requiring higher food, quick
Tip pooling FOH, BOH share of tips hourly wages service
Percentage- Servers, A fair and formal Structure and Establishments
based tips other FOH way to divide tips percentages that require a
outs staff amongst servers must be laid out diversity of staff
and other staff clearly and (servers, hosts,
directly or this bussers, food
structure can runners, etc.) to
become run smoothly
 confusing
Does not take
into account
level of
A straightforward experience, Fast casual,
way to ensure that position, or
all staff is tipped standard of cafes,
Total hours All eligible out evenly for service
worked staff each hour worked provided breweries,
Servers make
less in tips, and
All servers Encourages team puts more
or cashiers, to work together pressure on Full service
Percentage other FOH to provide high them to sell restaurants,
of sales staff quality service more casual restaurants
Does not take
Distributes tips into account
based on level of slower shifts or
All eligible responsibility of individual Full service
Points based staff each position performances restaurants
Tips Paid To Those Who Collect

The most straightforward tipping approach is letting employees who directly earn
tips keep them. It would be up to the recipient's discretion how much — if any —
of their tips they share with their coworkers.

This approach incentivizes servers to create a stellar experience for every party, as
they directly benefit from higher tips. It could also incentivize other FOH
employees like bartenders and bussers to work faster and alongside highly-tipped
servers to earn a portion of their gratuities.

As a downside, servers don't have to share these tips, and there might not even be a
tip out. This discrepancy worsens the wage gap and can put servers working for
themselves rather than as a team. It also puts added financial pressure on the
restaurant to cover the tip credit if these workers don't make at least the Federal
minimum wage between their tips and their tipped minimum wage.
Even Tip Splitting

Even tip splitting is when all earned tips are pooled and split evenly among
qualified staff. You might see this solution at fast-casual restaurants or coffee
shops, where a tip jar sits on the counter, and its contents are divided among the
team at the end of a shift.

At full-service restaurants, even tip splitting is still an option. When done well, it
creates a sense of camaraderie rather than competition among staff. For example, a
server stuck with a table that doesn't tip well — regardless of their server's efforts
— wouldn't have to worry about the personal financial implications.

However, this option can backfire if not all team members hold themselves to the
same standard of service. A positive, efficient server who consistently brings in 20-
25% tips might feel neglected when being forced to share his earnings with a less-
attentive server which averages 15-18%. This option can also diminish servers'
earnings by handling more tables and larger parties.

Tip Pooling by FOH & BOH

Until recently, back-of-house workers were not legally allowed to be included in
tip pools. But the Department of Labor and the Fair Labor Standards Act (FSLA)
has made it clear that cooks, dishwashers, and their back-of-house coworkers can
be included in the tip pool.

Sharing tips with kitchen employees effectively bridge the wage gap between FOH
and BOH workers. It results in better kitchen staff retention and provides more
compensation to those working busier shifts.

However, this approach can take even more of a cut out of a server's tips. Effective
servers which are used to taking 50-70% of the tips they worked to earn, for
example, may now find themselves only keeping 30-40%. Additionally, to take
advantage of this new option, restaurants must pay employees the full minimum
wage rather than benefiting from any tip credit. For those reasons, you might
consider a kitchen appreciation fee instead of sharing FOH tips with kitchen staff.
Percentage-Based Tip Outs

The most formal option — often the most agreeable — is percentage-based tip-
outs. This method looks at a server's total tips for a shift and then distributes a
portion to other employees based on a set percentage. For example, if a server
receives $100 in tips for the shift, a percentage-based tip out may distribute that
money as follows:

 70% for the server to keep, or $70.

 15% for the bartender, or $15.
  10% for the food runner, or $10.
 5% for the busser, or $5.

With this model, tip-outs must be closely monitored. You'll also need to determine
if tip pooling within this model—do all servers in a shift get 70% of all tips
collected, or does each server keep 70% of their earnings?

This approach to tipping out is systematic and easy to understand, so employees

can reasonably predict how much they'll earn per shift.

Total Hours Worked Based Tip Outs

Another form of tip pooling, tips based on hours worked adds the total amount of
tips made in a week or day, and divides the total amount of tips by the total hours
worked. Then, that number is the number of tips/hours employees would receive
for every hour they worked.

For example, say that your coffee shop made $75 in tips in one day. Two
employees worked in the morning for 6 hours, and two each worked a 4-hour shift
in the afternoon. Those two employees worked 20 hours that day, so $75/20=
$3.75/hour in tips. The employees who worked the long shifts in the morning
would receive $22.50 each, while the employees in the afternoon would receive
$15 each.

This structure works best in a food service operation where tip-eligible employees
do an even amount of work and have similar positions and experience levels.
Additionally, if someone gets stuck with a slow shift, this will not negatively
impact their tips. One drawback to this structure is that it may not incentivize some
employees to provide an excellent standard of service.

Percentage of Sales Based Tip Outs

In this structure, individual servers would tip out a certain percentage of their sales
to additional staff. The percentages must be determined at your establishment, but
it might look like 2 percent to the host, 5 percent to the food runner, and 8-10
percent to the bartender. A server with $50 in drinks sales would tip the bartender
around $5. If they had around $250 in food sales, then $12.50 would go to the food
runner and $5 to the host.

This encourages the restaurant staff to work as a team to provide better customer

service. However, when shifts or slow or tips are low (possibly due to things
outside a server's control), this might be unfair to servers relying more heavily on
the tip than other staff.
Points-Based Tip Pooling

A point system for pooled tips is one of the more complex methods, with different
types of employees awarded a certain number of points. The points correlate with
the amount of responsibility (specifically in customer service), and the more
points, the more tips.

Servers would likely have the highest points, say 15, while bussers and food
runners may have 5. A bartender could have 10, while a host could have 7. The
total amount of tips would be divided by the total amount of points and then would
determine how much each point is worth in tips. You would multiply each
employee's points by how much one point is worth.

Recommended Download: Free Restaurant Tip Pooling Calculator and Template

How to Choose the Right Tip Payout Method For Your Business

The right tip payout method for your business depends on your service model.
Here are a few common service styles and what should be considered when
choosing a tip payment method.

Full-Service Restaurants
Servers at traditional full-service restaurants rely on tips more than any
other restaurant concept. It's important to consider how many employees are in
tipped positions, your staff's experience, the shift schedule structure, and projected
wages with tips added.

In a fine-dining establishment with career servers, a shared tip pool might work
well, as employees will know to support each other on the floor, and everyone will
carry their weight.

Conversely, if your restaurant team's experience level varies, think through the
impact of tip pooling. Veteran servers may resent sharing tips with rookies—but
those new hires may appreciate the wage security from communal tipping and be
inclined to stick around longer.

Quick-Service Restaurants
Tip jars (and their digital equivalents) are popular among workers at quick-service
restaurants like cafes, pizzerias, and ice cream shops. It's common for the tips
earned by the staff to be divvied up evenly after each shift, with all eligible
employees taking a cut.

The only other decision the business needs to make is whether or not back-of-
house employees are eligible for tips if they have any.

Fast Food Restaurants

Like QSRs, fast food restaurants might have a tip jar (or digital equivalent) for
either counter workers or all employees to share at the end of a shift. However,
most fast food chains like McDonald's don't allow their workers to receive tips. If
your fast food restaurant is an exception, clearly define who is eligible to be tipped
and if any role gets a more significant cut of tips than another.
Cafes or Breweries

These establishments may or may not have a BOH; a cafe may just have a crew of
baristas that make coffee, heat up pastries, and do dishes themselves. A brewery
likely has one or two “beertenders” pouring pints and clearing tables. In most cafes
and breweries, a tip-out is a structure where tips are paid out every shift or per hour
worked. Most employees working the FOH in these establishments have similar
jobs and skills; therefore, some type of tip pooling structure makes the most sense.

Casual Dining Restaurants

At a casual dining restaurant, a server will probably take your order at the table,
and there may be bussers and food runners assisting the front-of-house staff. Tips
will likely not be as significant in this establishment as in a full-service or fine
dining restaurant and will, therefore, not impact your servers' take-home pay.
Servers will need to be paid a higher hourly wage, and then the business could
distribute tips in a percentage-based tip-out structure.

Fast Casual Restaurants

Fast casual is an establishment between fast food and casual dining. Chances are
you will probably order at the POS system with a cashier (as opposed to a server)
and then sit and wait to be served by a food runner. Without the need for servers, a
more even distribution of tips, like in total hours worked or tip-splitting structure,
is the logical choice.
Fine Dining

At a fine dining restaurant, tipping is a considerable part of a server's take-home

wages, and this is something that diners should be factored into the cost of their
meal. At this establishment, servers receive a high level of training from fulfilling
their job and likely having years of experience under their belt. Often, they have
additional training in certain fields, such as wine, liquor, cheese, etc. Part of the
fine dining experience is the atmosphere and the service, and servers play a large
part in this. Career servers should be paid fairly for their expertise and take a large
portion or all of the tips they earn directly.

Other Tip Payout Considerations

Before setting up your tip-out structure, remember to factor in these considerations

to stay compliant and ensure staff is satisfied with the approach.

Local Laws
The legality of tip-outs and tip-pooling are subject to local regulation. For
example, Minnesota restaurants are not allowed to pool tips. We recommend
reviewing your area's laws before adopting or altering a tip-out procedure to
remain legally compliant. Check out this guide on state by state tip pooling laws.
The most significant local rule to check during tip-outs is whether your area has a
tip credit. Some states like California require employers to pay the full minimum
wage regardless of tips — meaning restaurants can't rely on the tip credit to offset
their contribution to wages. Most other states, however, do allow tip credits. If
your restaurant is allowed to take a tip credit, it simply means you cannot reduce
an employee's tips through tip-outs to the point of being paid below minimum
wage. If this happens, the restaurant must make the difference to get that employee
to minimum wage.
Who Should Get Tips? And What is Fair?

First and foremost, tips should go to servers and bartenders. They're the frontline of
service in a full service restaurant and should be rewarded for their direct efforts in
making the guest experience what it is. After that, it's entirely up to the restaurant
how it sets up its wage and tipping structure. Most restaurants recognize the hustle
of bussers and food runners and include them in tip-outs, while others might loop
in the host or hostess.

Regarding fairness, it, too, is dependent on the restaurant. Let's revisit the idea of
tipping your hosts. If all the host does is greet diners and bring them to their tables,
they're not as active in the dining experience and might not be eligible for tips.
However, if they also take out orders, they're the only face involved in the guest
experience, so they may be worth including.

Finally, restaurants must determine the fair percentage for each employee included
in the tip-out process. While this also differs in each restaurant, you should
consider the number of employees in each role included in the tip-out, the level of
interaction with guests, and the overall impact on employee wages to determine a
fair tip out structure.

Tipping Out vs. Tip Pooling

The difference between tipping out and tip pooling lies mainly in the position one
holds in a restaurant. Tipping out occurs when servers distribute a portion of their
tip earnings to other front-of-house, non-waitstaff employees. On the other hand,
tip pooling refers to those in the same position combining their tips and taking an
equal amount from the pot. When tipping out, servers tend to keep most of the tips
they earned directly, but when tip pooling, their tip amounts could heavily
fluctuate based on the earnings of their peers.

Recommended Reading: Tip Pooling Tools to Manage Tips at a Restaurant

Implementing Tip Payouts Efficiently

Landing on a tip-out process is one thing — effectively implementing it is another.

Some restaurants might choose the basic route when it comes to tip splitting, such
as using the honors system for reporting tips and a spreadsheet to determine
everyone's share. However, servers who earn a generous cash tip might be less
incentivized to share the full amount, and let's face it - manually entering tip
amounts into a spreadsheet and distributing them accurately takes up far too much
of your time.

Nowadays, to fairly split and distribute tips in your restaurant, simply ensure you
have the right tools to record tips, pay staff, and source feedback on the tip-out
model from employees.

1. Decide on a Payout Structure That Works for Everyone

Making changes to an existing tip-out structure could directly impact an
employee's take-home pay. Therefore, it's essential to run any proposed alterations
to tip sharing by your staff in advance of those changes to ensure your model is
agreeable to employees. You should share these updates publicly in front of your
team, as well as electronically, and encourage them to share their thoughts and
feedback via one-on-one communication software.
2. Use Tip Pooling & Payout Software.
Rather than juggling multiple spreadsheets and software subscriptions, use
dedicated tip pooling software like 7shifts.
7shifts' tip pooling feature integrates directly with POS software to automatically
collect and divide tips among eligible staff. As a result, on average, managers' time
spent calculating tip payouts will be reduced by eight hours each week.

Tip Pooling
Software Example by 7shifts

3. Implement Custom Tip Pools

Setting up your tip pool structure shouldn't be a days-long activity. When using
7shifts' tip pooling software, all managers have to do to implement a new tip pool
is:

 Choose the location the pool is for.

 Add in the employees who are eligible for the pool.
 Define your tip pool rules.
  Building a tip pool in 7shiftsBuilding a tip pool in 7shifts

Building a tip pool in 7shifts

Moving forward, that saved tip pool will be available for you to utilize whenever
recording tips for a shift. You can also easily edit the rules of the tip pool or the
employees included should the need arise.
 Using a saved tip pool in 7shifts

4. Payout Employees and Gather Feedback

Whether this is your first tip splitting format or fourth, you should follow up with
your employees after their next few payouts to see how they're receiving the
structure. If you don't, you risk losing productive and efficient employees who feel
like the format doesn't acknowledge their work.

For example, with 7shifts' employee communication software, you can send an
announcement to all employees asking for feedback on the tip pooling format.
Employees can then communicate with you in-person or via 7shifts to provide
candid and actionable feedback to help you respond to their comments or concerns
ips and service charge
All customer cash tips and service charges are kept by restaurant employees in full.

When tips or service charge are paid for by a credit card or debit card, this is
distributed in full to our employees. These arrangements are agreed by the teams
locally through an independent Tronc system and are paid in full in addition to
National Minimum Wage and National Living Wage. We don’t charge any admin fees
or make any other company deductions.

Any tips paid in cash are retained by the individual waiter. They may or may not have
arrangements in place to share these tips with other employees in the restaurant and
staff in the restaurant kitchen. It is the responsibility of those receiving cash tips to
declare the income for tax purposes to HM Revenue & Customs. The company does
not participate in any aspect of cash tips. The Big Table Group and all of its restaurant
businesses fully support the UK Hospitality (UKH) voluntary code of best practice on
service charges and tips. More details of this code can be found on the UKH website.

In addition to tips, our employees benefit from 50% Employee Discount across all
The Big Table Group Brands on food and drink, Team Meals whilst on duty, savings
on 100's of retailers and activities through our Employee Advantages Scheme, along
with numerous incentives for our teams to get involved in.
Afternoon tea is a minimum of 2 people sharing one tea - vegetarian option is
available.

Bottomless upgrade:
This offer must be pre-booked, everyone on the table must upgrade. Booking allows
for 90 minutes of bottomless prosecco or soft drinks. We reserve the right to amend or
end this offer at our discretion. We reserve the right to refuse to serve alcohol to any
person clearly intoxicated. The offer is only valid in conjunction with the afternoon
tea.

Our policy is that only guests who can prove they are 18 & above can be served
alcohol for their own consumption. Due to the nature of this package we are unable to
accommodate under 18’s in the party, even for soft drinks. Not available at Cafe
Rouge Center Parcs or on delivery. Photography used is indicative and may not show
the current menu dishes.

TERMS & CONDITIONS

Rules of the House: Drinking to excess won’t be permitted & we reserve the right to
cease serving at any time. Participants are required to drink responsibly at all times
(www.drinkaware.co.uk). Bottomless bookings are 90min slots which start at the time
of your booking. Your slot will not be extended for late arrivals. Our policy is that
only guests who can prove they are 18 & above can be served alcohol for their own
consumption and due to the nature of this package all members of the party muct be
over 18. Bottomless upgrade is available for pre-booking only & availability times
may vary by restaurant location. The prosecco and soft drinks are only available
during this time. We will only top up drinks that are finished at our discretion. Offer
also available with soft drinks- if you or a member of your party will not be drinking
alcohol please let us know when you book. Price is per person & drinks cannot be
shared. All party members must upgrade.

Tips and service charge

All customer cash tips and service charges are kept by restaurant employees in full.

When tips or service charge are paid for by a credit card or debit card, this is
distributed in full to our employees. These arrangements are agreed by the teams
locally through an independent Tronc system and are paid in full in addition to
National Minimum Wage and National Living Wage. We don’t charge any admin fees
or make any other company deductions.

Any tips paid in cash are retained by the individual waiter. They may or may not have
arrangements in place to share these tips with other employees in the restaurant and
staff in the restaurant kitchen. It is the responsibility of those receiving cash tips to
declare the income for tax purposes to HM Revenue & Customs. The company does
not participate in any aspect of cash tips. The Big Table Group and all of its restaurant
businesses fully support the UK Hospitality (UKH) voluntary code of best practice on
service charges and tips. More details of this code can be found on the UKH website.
In addition to tips, our employees benefit from 50% Employee Discount across all
The Big Table Group Brands on food and drink, Team Meals whilst on duty, savings
on 100's of retailers and activities through our Employee Advantages Scheme, along
with numerous incentives for our teams to get involved in.
Afternoon tea is a minimum of 2 people sharing one tea - vegetarian option is
available.

Bottomless upgrade:
This offer must be pre-booked, everyone on the table must upgrade. Booking allows
for 90 minutes of bottomless prosecco or soft drinks. We reserve the right to amend or
end this offer at our discretion. We reserve the right to refuse to serve alcohol to any
person clearly intoxicated. The offer is only valid in conjunction with the afternoon
tea.

Our policy is that only guests who can prove they are 18 & above can be served
alcohol for their own consumption. Due to the nature of this package we are unable to
accommodate under 18’s in the party, even for soft drinks. Not available at Cafe
Rouge Center Parcs or on delivery. Photography used is indicative and may not show
the current menu dishes.

TERMS & CONDITIONS

Rules of the House: Drinking to excess won’t be permitted & we reserve the right to
cease serving at any time. Participants are required to drink responsibly at all times
(www.drinkaware.co.uk). Bottomless bookings are 90min slots which start at the time
of your booking. Your slot will not be extended for late arrivals. Our policy is that
only guests who can prove they are 18 & above can be served alcohol for their own
consumption and due to the nature of this package all members of the party muct be
over 18. Bottomless upgrade is available for pre-booking only & availability times
may vary by restaurant location. The prosecco and soft drinks are only available
during this time. We will only top up drinks that are finished at our discretion. Offer
also available with soft drinks- if you or a member of your party will not be drinking
alcohol please let us know when you book. Price is per person & drinks cannot be
shared. All party members must upgrade.