Plan Your Tip Pooling Policy

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In this Article:

• Toast Tips Manager Introduction
• Order Your Tip Pool Rules
• Tip Pooling Policy Creation Q&A
  • General Considerations
  • How do employees ring in sales in your restaurant?
  • Do your restaurant's tips and gratuities get pooled across the whole day, by service period (shift), or by order?
  • Do you pay out mandatory gratuity or delivery fees to your employees?
  • Do your employees get tipped against sales amounts, by specific percentage, or based on style of payment?
    • Salaried Employees
  • What works best for your restaurant, points or percentages?
• Communal Drawer Setup
• Region or Time-Dependent Job Setups
• Restaurant Type Setups
• Job-Specific Setups
• Generic Employees and Jobs for Large Parties, Banquets, or Shared Tables
  • Toast Web Setup
  • Process for Employees During Events Shared Tables
• Tip Policy Preview

Toast Tips Manager Introduction

The federal government outlines tip pooling regulations in the Fair Labor Standards Act (FLSA). State and local governments may have their own regulations too. Prior to setting up tip pools and/or shares for your restaurant within Toast Web, you should consult an HR professional and consider federal, state, and local laws when defining your restaurant's tip policy and distribution rules.

This article contains considerations for creating a tip pooling policy. Users who wish to create, modify, or update a tip policy will need Toast Web permission 6.6 Restaurant Operations Setup. This information can also help translate your existing policy by making suggestions or presenting scenarios. If you're looking for click-by-click instructions, refer to Get Started With Toast Tips Manager.

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Order Your Tip Pool Rules

Before reviewing the rest of the information regarding tip share and tip pooling rules, the following concept should be considered: the order of the tip pool rules on your Tip pooling policy page affects your policy calculations.

Therefore, if your tip policy utilizes more than one tip pooling rule (i.e., you've selected + Add pool at least once), keep in mind that these pools are separate from one another and do not look at each other for calculations.

We suggest structuring your tip pooling rules using the ideas below to help streamline your policy:
 

• In your tip policy, if a job should both contribute and receive tips, consider the order of the rules in how their total tips are being distributed. Are they contributing their tips before they're expected to tip out their support staff? This can potentially deny their support staff of tips. Are they receiving tips, giving them away, and then receiving them again as a result of the rule order?
• The rules closest to the top will typically contain small contribution percentages. Towards the bottom, we typically see larger contribution percentages. In the example below, tipping out the food runner before pooling helps ensure the food runner job will receive their tip-share before pooling those remaining tips.
• Don't forget to use the Preview button at the top of the page to test out your policy and the order of your rules against your own real data. You do not have to save the policy in order to preview it.

In the above example, the Bar Drawer contributor tips out 2% of food sales to the Food Runner recipient job, then the remainder of the Bar Drawer tips go to the pool which Bartender and Bar Back recipient jobs receive from. These rules are in the correct order because Toast will pull 2% of food sales from the Bar Drawer contributor's tips for Food Runner recipient jobs before it splits the remainder of the Bar Drawer tip total between the Bartender and Bar Back recipient jobs. This ensures the Food Runner recipient job is tipped out before the pool is "empty."

If these two rules were switched and the 100% pool was somewhere above the 2% pool, Tips Manager would contribute 100% of the Bar Drawer contributor tips to Bartender and Bar Back recipient jobs and then look for the 2% of tips to contribute to the Food Runner recipient job. However, there are no tips left over after 100% was already contributed, so Toast won't have anything to contribute to the Food Runner recipient job.

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Tip Pooling Policy Creation Q&A

Tips Manager relies on the settings and data configurations within Toast Web to correctly perform its calculations. Refer to the following questions to create or implement your existing tip pool policy.

General Considerations

1. Break down the goal: Start by clearly defining the end result you want to achieve. What specific rules do you want to achieve? What are the specific rules you might already use? Do you have advanced builds like shared tables, banquets/events, or splitting tips between people in certain parts of your restaurant? Once you have a clear target, it's easier to break it down into smaller, more manageable rules.
2. Research different approaches: There's often more than one way to reach a goal. Try them out yourself and use the Tip Policy Preview feature; there is no harm in testing it out. Toast does not support "if" or "average" tip rules, so you may need to try different setups to achieve your goal or get as close as possible to it.
3. Identify key milestones: Have you solved for all the tips your business produces? Ensure all tips are distributed according to your intended rules.
4. Focus on actionable steps: First, set up your system for Toast Tips Manager. Then build a tip rule starting with a main source of tips in your restaurant (e.g. server or bartender tips). Once complete, continue to break down your tip policy with secondary rules. Use generic profiles to achieve online ordering tip distribution goals and don't forget to ensure 100% of any generic profile tips are distributed so they aren't left to a fake profile. 
5. Adapt as you go: Things don't always go according to plan. Be prepared to adjust your steps as you encounter obstacles or discover new information. Focus on progress, not perfection.

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How do employees ring in sales in your restaurant?

Tips Manager distributes tips based on the job employees clock into. When setting up your policy, you'll select a job or jobs to contribute a certain percentage of tips, gratuities, and/or sales categories. Do not select both tips/gratuities and sales categories within the same tip pool rule, as this will be redundant.

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Do your restaurant's tips and gratuities get pooled across the whole day, by service period (shift), or by order?

Use the table below to help decide which tip pooling interval works best for your restaurant's tip pooling policy. Consider what conditions you need and what the best fit is based on the functionality described in each column. Tips Manager allows you to select one interval per location; you cannot isolate specific intervals for specific tip pool policies.

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Do you pay out mandatory gratuity or delivery fees to your employees?

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Do your employees get tipped against sales amounts, by specific percentage, or based on style of payment?

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What works best for your restaurant, points or percentages?

Points and Percentages With Toast Tips Manager offers a more detailed look at the difference between the two settings, some examples of each configuration, and a table of considerations to comprehensively help you decide whether to use points or percentages.

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Communal Drawer Setup

Communal drawers are common in restaurants that have multiple employees ringing in sales into a single cash drawer (think bartenders, banquets, or fast-casual cashiers). If your restaurant utilizes this configuration, discover how to best align your practices with Tips Manager.

To set up this drawer for online ordering, refer to Toast Tips Manager and Online Ordering.
 

1. In Toast Web, navigate to Employees > Employee management > Employees and select + Add New Employee to create a generic employee.
   1. For Toast Payroll users, this setup is an exception to the idea that all employees should be entered into Toast Payroll instead of Toast Web. This is because generic employees won't be paid and don't require a timesheet or mapping.
2. Name this generic employee according to what role or responsibility the entity has - something like Cash Drawer or Bar Drawer.
3. Assign this generic employee a POS access code and share it with the employees who will be ringing in sales into that drawer.
4. Leave Jobs and pay blank for now, and select Add.
5. Find this employee and select the pencil icon to open their permissions.
   1. Set up this generic employee with at least 1.2 Quick Order Mode, 1.6 Apply Cash Payments, 1.12 Shift Review Sales Data, and 3.12 Shift Review.
6. At this point, there are two different ways you can handle assigning a job to this generic employee:
   1. Create a job that is unique to this generic employee and assign it to them. This job shouldn't be the same as any of your other jobs, nor should it be assigned to actual employees. If you choose this option, your employees will also have to clock in this generic employee when it begins collecting sales. This is because Tips Manager requires time entry data (if it's not from online ordering or salaried employees) in order to calculate tip/gratuity collection and distribution.
      1. Navigate to Employees > Employee management > Jobs and select + Add Job > Create New Job.
      2. Add a unique Job Title, select hourly for the Pay Basis, and mark Tipped? as Yes. This employee must enter cash tips at closing.
      3. Select Save and return to Employees > Employee management > Employees.
      4. Select the pencil icon for your generic employee and mark the checkbox for the job you just created. Select Save.
   2. Leave the generic employee's job blank. Their sales will then be captured under the default Salaried or Online Ordering and Salaried contributing job. If you choose this option, any other sales collected by "salaried" entities (additional generic employees, managers, or anyone who does not clock in, but takes orders) will be distributed by this role. This means if you have a Bar Drawer generic employee without a job assigned to them, their defaulted "salaried" job will lump them in with the other sales mentioned.
7. We'll continue below using option A, a generic employee with a unique job. The generic employee is named Event Drawer (not shown), and it clocks into the unique job Event. That job contributes 100% of its tips (the suggested configuration for generic employees) to employees who have clocked into the jobs Event Server, Event Support, and Event Bar.
   
   
   
   
8. Toast recommends distributing tips via points (rather than percentages) for communal drawers. This is because if one or more of the recipients of the pool doesn't work that day, the system will try to return that money to the contributor. In this case, the contributor is non-human, so this is an error because all money collected by non-human personas requires distribution in Tips Manager.

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Region or Time-Dependent Job Setups

If you have employees who work in specific regions of the restaurants or at a specific time and you'd like those pools to stay separate from other pools (for example, not be dependent on the intervals of Full workday, Service Period, or Order), consider making jobs that reflect those needs. Some examples:

• AM Bartender, Prep Bartender, and PM Bartenders allow these different roles to distribute tips between the different times of day. An example of this is if a prep bartender receives a portion of distributed tips for helping setup the AM and PM Bartenders for their shifts (service periods).
• Patios are a great example of keeping pools within a specific group of regionalized employees. If you're scheduling Patio Servers, Patio Bartenders, and Patio Bussers for your patio, you can build pools that don't cross over with indoor jobs.

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Restaurant Type Setups

Over-the-Counter Service

This could be a relatively simple tip pool. If all of your tipped staff clocks into the same job, such as Cashier, you might use a single tip rule with Cashier as both the Contributor job and the Recipient job. In this example, you might set your source of the pool to be 100% of either all tips or all sales (never both) and then use the Proportionally by hours worked setting. If you use Toast Payroll, check out the Pay Cash Tips section of Tips Manager With Toast Payroll. Note: Toast Tips Manager cannot pool tips across a time frame longer than a day.

Restaurants With Bars

Full service (sit-down) restaurants with a bar commonly have lunch and dinner service. These two service periods might have their own tip rules for bartenders.

AM (lunch) bar service might offer higher wages for bartenders since they might work alone for this shift. If a bartender works by themselves, without barbacks or any other support, they would tip out (i.e. food runner), they may not even have a tip rule where they're the Contributor during lunch service. Rather, they might just be a tip out Recipient on a pool of AM (lunch) servers or other staff who are the Contributors. 

On the other hand, PM (dinner) bar service might include multiple bartenders on a single shift and could possibly also include barbacks or other support staff. In this case, bartenders might have more than one tip rule and the order of the rules will be vital. Refer to the Order Your Tip Pool Rules section for an explanation of this concept.

• The first tip rule might send a portion of the Contributor bartender's tips or sales to their Recipient support staff.
• A second tip rule might include bartenders as a Recipient of tip outs from servers or other Contributors based on a percentage of the contributor's bar sales.
• Lastly, a third rule might pool all bartenders as both the Contributor and Recipient with 100% of either tips or sales (never both). Since this is the third rule, this pool would involve a) the remainder of all PM bar tips after tipping out in rule one plus b) the tip outs they received from rule two.
  • Rules 1 and 2 could be switched in some policies.

Night Clubs

Bottle service at bars and clubs may use a setup where tips are distributed only within the same jobs that receive them, so a tip rule might use the same Contributor and Recipient job. Your policy might also include tip outs for support staff (dancers, security, server assistants, etc.) or might even share tips between multiple jobs who receive tips directly. When tips outs and pooled tips are combined in a tip policy, always be aware of the order of the tip rules. The Order Your Tip Pool Rules section can offer more details.

Banquets/Large Parties/Events

One important thing to keep in mind is tips versus gratuity and how your policy is set up to distribute the two. Some states have additional laws on gratuity, so make sure to become familiar with those before applying a tip policy with gratuity included. Banquets, large parties, and events often come with service charges which can be directed to employees of the restaurant (mandatory gratuity) or the restaurant itself (employer-kept service charge).

You might use generic employees and jobs to separate the sales, tips, and service charges of these banquets, large parties, and events from the rest of your business since they can be atypical of a restaurant's normal operations.

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Job-Specific Setups

Servers and Cocktailers

As it turns out, restaurants that use servers and/or cocktailer jobs typically see the highest variance in how they can set up their tip policy. There are several options a restaurant can choose from and this list does not include all of them. As a few examples:

• In restaurants that operate an over-the-counter system with cashiers, tips might be split Equally or Proportionally among all eligible jobs.
• In full service (sit-down) restaurants, servers usually open and close checks themselves and receive tips directly, with only a support job or two that they tip out.
• If there are multiple sections in a restaurant (dining room, lounge, patio, etc.) where tips should remain with customized jobs associated to each section, there may be multiple tip rules containing the customized jobs as both Contributors and Recipients.

If you're having trouble deciding what your tip policy should be, the Tip Policy Preview feature lets you use your restaurant's own historical tip data to show you the calculations and results of a potential tip policy you're testing out.

Barbacks and Food Runners

Barback and food runner jobs might only appear in a tip rule as a Recipient since they do not typically receive tips directly from guests. They might receive a tip out based on bartender/server total tips rather than total sales.

Sommeliers

A sommelier Recipient job might receive a portion of all wine sales categories from any Contributor job that sells wine. If they're salaried, a sommelier job might not directly appear in a tip pool (outside of the online ordering and salaried job).

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Toast Web Setup

1. We'll use the "servers sharing a large party or banquet room" example mentioned above.
2. Begin by creating a generic job named something like Banquet 1. The generic job should have all the same permissions of the employees (in this example, servers) who will be using it and should also be flagged as a tipped job. This job does not need a wage rate, so leave its Default Pay field blank.
3. If you haven't already, create a second job named something like Banquet Server 1. This is the job that servers who are involved in the banquet will clock into. This job should similarly have all the same permissions of the employees who will be using it and should be flagged as a tipped job. Assign an appropriate wage rate to this job.
   1. Do the same for any other jobs involved, such as Banquet Busser or Banquet Food Runner. This will separate them from other jobs that are not working the banquet.
4. Now, create a generic employee named something like Banquet Generic (not shown below). This generic employee should have a unique POS access code and should be assigned to the generic job created in step 1.
   1. For Toast Payroll users, this is an exception to the idea that all employees should be entered into Toast Payroll instead of Toast Web. This is because generic employees will not be paid.
5. Next, assign each server who may work a banquet to the new job you created in step 2. Do the same for any other jobs you also created.
6. We want to create the tip policy next. Navigate to Employees > Payroll management > Tip pooling policy. Using guidance from the different sections above and Get Started With Toast Tips Manager, build the first rule(s) to share money from step 1's generic job to the jobs supporting this banquet, such as Banquet Food Runners and Banquet Bussers.
7. In a new rule, add step 1's generic job as a contributor and add step 2's real job as a receiver. This rule should be built with 100% contribution for step 1's generic job in order to move the remaining amount of money to real employees and away from the generic employee.
8. In each rule, under Advanced Settings, you might decide to toggle the How are tips divided among pool recipients? setting to Equally regardless of hours worked.
9. Save your work once complete. Check out the example below (two images) and then scroll down for employee instructions during a banquet.
   
   
   
   

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Process for Employees During Events and Shared Tables

1. Any employee working in the shared area will clock into their large party/shared table job [in this example, Banquet Server 1, Banquet Busser, and Banquet Food Runner].
2. The first one to arrive will also clock in the generic employee [Banquet Generic] to the generic job [Banquet 1].
3. These employees should ring in their own (not shared) orders under their own POS access code and ring in the large party/shared orders under the generic employee's [Banquet Generic] POS access code. This isolates the shared orders while allowing the employee to keep orders and tips that only belong to them.
4. At the end of the service period, employees will run their own shift reviews as well as one for the generic employee [Banquet Generic].
5. Once the tip pool is approved, employees will see a tip amount associated with their shared orders in Toast Payroll.

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Tip Policy Preview

Users can now create or edit tip policies and use the Preview button to see how the unsaved policy would distribute tips against a recent day of business. This allows you to use your own real data to determine how the policy matches up to your tip pooling goals without having to first publish the policy. To use this feature, there must be at least one tip pool created already.

1. Navigate to Employees > Payroll management > Tip pooling policy.
2. In the upper-right corner, select Preview.
   
    
   
   
3. Here, select a day in the past to apply the current tip pool configuration.
   1. If you've selected Service Period as your tip pooling interval, use the tabs to switch between the service periods (shifts) for each day.
4. The system will now apply your current tip pooling policy settings to the tip data from your selected date. This will show you how tips and gratuity would have been distributed to the employees who worked that day. This can help verify that the intended persons are involved in the pool and that all tips were accounted for.
   1. You may also select an employee to bring up their tips receipt, allowing you to further dive into the calculations behind the results.
5. Use the Back to policy button to revert back to the previous page and make adjustments as needed. Return to this page to see those updates in action.
6. Once the preview gives you the desired outcome, select Back to policy at the top of the page and select Save to put this policy into effect.

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This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.