Tip Distribution Strategies
Collecting tips into a pool of money and distributing the funds to staff is a standard practice in the restaurant industry. The method of deciding what share of the collective tip pool is distributed to each staff member varies widely. We’ve been collecting the spreadsheets operators use to distribute tips to their staff for years and have identified 3 primary methods of tip distribution.
1. Equitable Tip Distribution
The simplest and arguably the “fairest” method is to distribute tips proportional to the hours worked, regardless of position or seniority. If the dishwasher, the prep cook, and the sous chef all work the same number of hours, they share in the tips equally.
2. Ranked Tip Distribution
Operators often want to incentivize some roles over others. It’s more difficult to find a talented and reliable Grill Cook than it is to hire a new Dishwasher. Offering those difficult roles, or staff with seniority, a larger portion of the tips helps attract and retain talent. In this strategy tips are distributed to staff based on hours worked in a role multiplied by a distribution factor for that Role. If the dishwasher, the prep cook, and the sous chef all work the same number of hours, the dishwasher receives a smaller share and the sous chef the largest.
3. Allocated Distribution Strategy
Some restaurant operations choose a team oriented strategy. Staff are divided into various teams; Support, Management, Back of House. Each team is allocated a portion of the house tip pool and staff in that team divide their team’s allocation by hours. The Host and Expo would share the Support team’s 20%, floor managers would split 20%, and the BOH would divvy up the remaining 60%.
4. Hybrid / Frankenstein Strategy
The above three strategies are the most common, but some operations choose more elaborate methods, often combining the common approaches into a hybrid. These strategies are complex by nature and less transparent as a result. The distribution of tips are hidden behind layers of Excel formulas and are difficult to communicate and implement, which strains relationships with staff and often runs afoul of labour laws.
It’s worth noting that the selection and implementation of any tip strategy by management of a restaurant can cause Revenue Canada to label the tips as “controlled”, an important distinction that can lead to significant liability - the restaurant can be retroactively held responsible for wage source deductions like employment insurance and pension plan contributions. Your best protection is to implement an employee run tip committee that decides on the strategy and implements the tip distribution.
We’ve built the three most common strategies and the ability to turn tip distribution over to a staff run committee into the Teams version of BlackFox. Which provides advanced features to manage tip pools and new cash-less options for tip pay-outs by integrating with the Today card.
