Get Started With Toast Tips Manager

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Toast Classroom - Tips Manager

In this Article:

• Toast Tips Manager Features and Definitions
• Purchase Toast Tips Manager
• Set Up Toast Web for Tip Pooling and Management
  • Employees and Their Jobs
  • Hours of Service
  • Mandatory Gratuities
  • Sales Categories
  • Tip Withholding
  • Cash Tips From a Single Source
  • Shift Review and Closed Shift Configuration
  • Toast Payroll Configuration
• Set Up a Tip Policy
  • Tips Manager Onboarding Wizard
  • On Your Own
• Order of Operations

Toast Tips Manager Features and Definitions

Toast Tips Manager is an automated, integrated, and customizable tip-pooling solution. Based on your restaurant's configuration, it can calculate and distribute the tips and gratuities your restaurant receives.

There are two components to Tips Manager:
 

• Tip Pooling: In Toast Web, you build your rules by configuring the inputs, including which jobs contribute and receive tips, what hours are part of certain time periods, and what types of tips and gratuities should be included.
• Tip Management Report: The output of your configuration in Tip Pooling is a report that can be integrated directly into Toast Payroll or downloaded. This report includes a Tips Receipt, a breakdown of each employee's pooled calculations.

The federal government outlines tip-pooling regulations in the Fair Labor Standards Act (FLSA). State and local governments may have their own regulations too. Before 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.

Other important definitions revolve around the difference between tips, gratuities, and service charges as they relate to the Toast ecosystem. You may have used these terms differently in the past or they may be new to you, but this is how Toast describes these items:

• Tips: Tips are voluntary, discretionary payments on a check decided on and paid for by the guest or the person paying the check. This is considered income by the person who receives it, but it is not a wage
  • Tips can be paid via all forms of payment and even includes gifts.
  • If an employee receives a tip and it gets tip-shared or tip-pooled and sent to another employee via Toast Tips Manager, only the second employee claims this as income, not the first employee who it was not paid to. 
• Service charges: Service charges are mandatory amounts added to a check by the restaurant. Some are automatically added and others are manually added. There are two different types of service charges in Toast: employer-kept service charges and mandatory gratuity.
  • Employer-kept service charges: Service charges for things like utensils, large parties, corkage fees, etc. are reported as restaurant sales. 
  • Mandatory gratuity: In Toast, mandatory gratuity (grat) is a type of service charge which is added to the check by the restaurant, but paid to an employee as wages (box 1 income on a Form W-2), not tips (box 7 amount on a Form W-2). It is not optional, whereas a tip is voluntary. This is not the only difference between tips and gratuity though.

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Purchase Tips Manager

Tips Manager is available to all US Toast customers (with subscription purchase). While you no longer need Toast Payroll to use Tips Manager, customers see plenty of benefits from the integration of the two products. Check out Toast Tips Manager in the Toast Shop to see the most up-to-date pricing model.

With the Toast Payroll suite, the Tips Management report can be automatically imported to your employee's timesheets and onto their paychecks or distributed almost instantly to your employees with the help of the Toast Pay Card and PayOut payment method. If you do not use Toast Payroll, Toast Tips Manager reports can be downloaded and imported into another payroll software or accounting system.

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Set Up Toast Web for Tip Pooling and Management

Before setting up tip policies for your restaurant within Toast, we recommend consulting an HR professional to help consider federal, state, and local laws when defining your restaurant's tip policy and distribution rules.

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Employees and Their Jobs

Toast Tips Manager distributes tips based on the job an employee clocked into that day, not on a per employee basis. While setting up your policy, you will select a job or jobs to contribute a certain percentage of the tips/gratuities or sales categories you select. Tips Manager works best when all your employees are clocking into the correct job in Toast Web and those jobs are appropriately assigned to the Tips Manager policy. Find more information in Create and Edit Job Roles for Toast POS.

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Hours of Service

There are three pooling intervals that affect your restaurant's entire tip policy: Full workday, Service Period, and Order. If you decide to pool tips by service period, your Hours/services must be configured accordingly. This will be the basis for when your employee's tips are collected. See Plan Your Tip Pooling Policy for more details.

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Mandatory Gratuities

You might select specific types of mandatory gratuities to include in each rule; just use the checkbox next to the gratuity type you'd like to be included in each specific rule. To set up a service charge as a gratuity, review the Mandatory Gratuity in Toast section of Get Started With Service Charges and Mandatory Gratuity.

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Sales Categories

If you choose to calculate tip pools or tip shares based on the sales employees make from certain categories (i.e., Food, N/A bev, etc.), consider reviewing your menus, menu groups, and items and assigning, creating, or validating their sales category.

If you'd like to only view the items that do not have a sales category assigned to them, navigate to Reports > Sales > Sales breakdown. Select a wide date range (e.g. the last month) and any applicable locations before selecting Submit. Now scroll to the bottom of the table. If you do not see No Sales Category, you had a sales category assigned to every item you sold in that date range. If you do see this entry, select the caret icon to the left to view all menu items without a sales category. If you use seasonal menus, consider repeating this with other date ranges.

Keep in mind that sales categories are not retroactive. The system will only track sales categories from the moment you publish the changes. So if you recently assigned these and are using this method in your tip pooling policy, you may wish to wait out your current pay period and begin tip pooling on the next pay period.

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Tip Withholding

As Toast defines it, tip withholding allows a restaurant to reclaim a percentage of employee credit card tips/gratuities in order to cover the cost of credit card processing fees. If you choose to utilize tip withholding, be aware that Toast Tips Manager will not retroactively update when the tip withholding percentage is updated or changed. This might cause discrepancies in reporting between the Tips Manager and the Sales Summary. This is expected to be taken into account for any business that might be weighing different tip pool or tip withholding options and will be reflected in the reporting and total distributions.

Tip withholding is applied before tips are pooled. The Labor Summary will display the amount before tip withholding, but Toast Tips Manager will display the amount after tip withholding.

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Cash Tips From a Single Source

Some restaurants use a tip setup where all cash tips are collected in a tip jar. This amount of cash tips can be declared in Toast and with appropriate tip policy setup, can easily be redistributed to each of the intended recipients, regardless of who originally owned the transaction with the tip.

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Shift Review and Close Shift Configuration

1. In Toast Web, navigate to Employees > Shift review > Advanced shift review setup.
2. Next, locate these four items and configure their settings as described below
   1. Non-cash tips: Select Pay out through payroll.
   2. Gratuities: Select Pay out through payroll.
   3. Declare cash tips: Select Tipped employees must declare cash tips.
   4. Negative cash tips: Select Do not allow. This option only appears once Declare Cash Tips is set to Tipped employees must declare cash tips.
       

While you may choose to pay out the cash tips, non-cash tips, and/or gratuities in another manner, you must select these options for Tips Manager to work optimally. These setting suggestions prevent both a premature distribution of tips when an employee clocks out and also undeclared cash tips which cannot currently be accounted for in Tips Manager. Refer to Shift Review Overview for additional details. 

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Toast Payroll Configuration

If you utilize Toast Payroll, follow the steps in Toast Tips Manager With Toast Payroll to complete the setup of your payroll system and align your earning codes with your desired payout method (paying cash tips, non-cash tips, and/or gratuity either on the paycheck or prior to running payroll). Toast does not automatically do this.

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Set Up a Tip Policy

You can create as many rules within Toast Tips Manager as your tip policy requires. Each rule will contain Contributor Job(s) which provide a % of Source(s) to Recipient Job(s). Once a tip pooling policy is configured, it automatically applies and does not require any further action unless changes need to be made. When changes are made, they only apply to new days/shifts/orders, so manual adjustments would be necessary if retroactive changes are needed.

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Tips Manager Onboarding Wizard

When you're ready to set up your first tip rule on your policy, navigate to Employees > Payroll management > Tips pooling policy. Select Visit policy onboarding at the top of the page and the Tips Manager onboarding wizard will guide you through setting up a tip rule. Toast Tips Manager Onboarding Wizard has all the details you need to follow along.

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On Your Own

After creating your first tip rule, any remaining rules can be created from scratch. We strongly suggest reading the Order of Operations section first so you rank your tip rules accurately.

1. In Toast Web, navigate to Employees > Payroll management > Tips pooling policy. Alternatively, search for Tip pooling policy in the Toast Web search bar.
2. You will most likely keep your Tip pooling interval as is since this option affects your entire policy. Be very careful when adjusting this option after your policy is in effect.
   
   
    
3. Scroll down a little further. If you use Toast Online ordering server setup, you will see a prompt to complete its setup in Tips Manager. We recommend setting up your other tip pooling rule(s) first, then returning to complete the setup of either the default or custom online ordering pool.
4. Select +Add pool to begin creating your policy outside of online orders.
5. Begin by selecting the edit pencil to name your pool. Make sure it's descriptive. Toast recommends naming it based on the contributing and receiving jobs for this particular rule.
   1. If your restaurant has Toast Payroll and your employees use the MyToast app, employees will be able to see the pool names they are a part of as part of their individualized digital reports.
6. Using the drop-down, select a Contributor job. If you are unsure about what job to select as a contributor, refer to Plan Your Tip Pool Policy.
   1. Employees that do not have a time entry (i.e. who do not clock in to a POS device to record time entries) are categorized as Online Ordering and Salaried (or just Salaried if you use the default online ordering rule that appears at the top under Online ordering pools).
      1. In the Toast Payroll system, employees that do not have a time entry cannot retain any tips. However, if these employees are included in a tip pool, these employees must contribute to the tip pool, yet will be unable to receive tips from the tip pool because Toast Payroll does not have a time entry and thus a timesheet to apply these tips to.
   2. If you have not yet set up your online ordering server, the Salaried contributor job will also be aligned with the Online Ordering job (seen as Online Ordering and Salaried). This will reconfigure if you set up a default or customer online ordering rule in your tip policy.
      
      
      
      
7. Enter the contribution %. This percentage applies to the tips/gratuities/sales categories for the job you've selected. This percentage will contribute to the pool.
   1. For all communal drawers or generic servers (such as online ordering), 100% of their tips earned should be distributed to prevent error.
   2. Contributions are always a percentage of a source, whether you have points or percentages set (in step 11).
      
      
      
      
8. Select the Source. The source designates where the tips are coming from. You may select more than one source at a time, but do not select both tips/gratuities and sales categories. Toast Tips Manager contains the following default source options:
   1. Non-Cash Tips: Tips left with a credit card or gift card and tips left by using other payments as configured in the Other Payment Options page in Toast Web
   2. Cash Tips: Tips left in cash
   3. Gratuities: These may be listed individually by name or may be listed as Cash Gratuities (gratuities left in cash) or Non-Cash Gratuities (gratuities from service charges paid with credit cards, gift cards, and other payment types paid out to the server).
   4. Sales Categories: All of your restaurant's sales categories will appear here. Use Configure Sales Categories if you need to create and assign new sales categories.
      
      
      
      
9. Select +Add contributing job if you need to add additional contributors to the pool. Depending on your policy goals, this may not always be necessary. Don't forget you can add additional rules to your policy.
   
   
   
   
10. Under Which jobs receive tips from the pool?, select the recipient job. This is the job for who will be receiving tips or gratuities from the pool. Some items to consider:
    1. If you are tip pooling, the contributor and recipient will be the same.
    2. If you are tip sharing, the contributor and recipient will be different. As a general idea, try to build rules where there are as many contributors as needed, but only one recipient job selected per rule. This prevents too many calculations and potential errors per rule.
    3. When there is only one recipient job in a pool, Toast will only display the Job drop-down menu (without the point/percentage field). If more than one recipient job should be entered, select + Add recipient job. You'll now see the options to input points/percentages.
11. Toast defaults to the recipient's tips and gratuities being divided both by points and also proportionally by hours worked. If you would like, select Advanced options to open and update these settings. Learn more about what works best for your policy.
    1. Under How are tip shares calculated?, select how you would like to split the contribution among recipients.
       1. Points are considered proportional shares of the contribution and are split according to which jobs had employees clocked in to participate.
       2. Splitting by percentage means the recipient jobs will see a fixed percentage of the contribution. If a rule is set to contribute to a job that had no employees clocked in to receive, the contribution percentage for that job will return to the contributor.
       3. Learn more about points versus percentages in Toast Tips Manager.
    2. Under How are tips divided among pool recipients?, select how the tips from the pool will be split among the recipients within the system: Proportionally by hours worked or Equally regardless of hours worked.
12. If you need to add another rule for a tip pool, select + Add Pool. Keep in mind that the different pools are related to one another, so the order of the rules matters. Also keep an eye out for overlapping settings.
13. If you have online ordering, follow the step outlined in Toast Tips Manager and Online Ordering to complete that setup at this time.
14. Finally, select Save at the top of the page. By saving the tip pooling rules, your Tip Management Report will be updated in real time, except for any dates you have already approved. If you want to change a tip pool during a pay period, make sure you have approved the dates ahead of updating and saving a new policy.
15. If you have sales data available in Toast, you can review your newly created tip policy using the Preview button at the top of the page. This allows you to use your own, real data to determine if your policy calculations match your expectations. For more details, see the Tip Policy Preview section of Plan Your Tip Pooling Policy.

Order of Operations

Rules in the policy are evaluated in the order they appear on the policy page. Toast reads your full policy from top to bottom and calculates as it goes down the page. Rules may be reordered by selecting the Move up and Move down buttons at the bottom of each pool (these buttons are only present when more than one tip pool rule is present).

In the example rules below, the Bartender_TT job tips out the Barback_TT job (2% of all non-cash tips and 2% of an 18% gratuity service charge), and the Server_TT job tips out the Bartender_TT job (3% of alcohol sales). If the rule labeled Bartender to Barback is higher on the page than the Server to Bartender rule (as shown below), that results in the Barback_TT job not receiving any portion of the tips from the Server_TT job's 3% of alcohol sales. If you reverse the order of the two rules and the Server to Bartender rule is higher on the page, the Barback_TT job will receive some tips from the Server_TT job when they receive a portion of the Bartender_TT job's non-cash tips in the next rule - that may not be the intentions of your policy.

For illustration purposes

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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 specific advice.