How does tip-out work, and how much is normal?

Who gets tipped out, and why

On a busy night you don’t serve alone. The busser clears and resets your tables, the bartender makes your drinks, the runner gets food out while you’re taking an order. Tip-out is how part of what your tables leave reaches them. Many of them earn a tipped wage too, so that money is part of their pay.

Who’s on the list depends on the house. A diner might tip out only the busser. A steakhouse might split it between bussers, the service bar, runners, expo and a host. Ask for the list and the percentages in writing. If your employer pays you a tipped wage and runs a mandatory tip pool, it has to tell you how much you’re required to put in (DOL Fact Sheet #15).

On sales or on tips: why it matters on a slow night

There are two common ways to figure it:

• A percent of your sales. You tip out on what you rang up, whatever your tables left. Houses like it because sales are on the POS check-out and cash tips aren’t.
• A percent of your tips. You tip out a share of what you actually made, cash and card.

On a good night the two come out close. On a bad one they don’t. Here’s the same server on two nights, with a 3% tip-out on sales next to 15% of tips:

On Friday the tables tipped about 20% of sales, so 3% of sales took 15% of the tips. On Tuesday they tipped about 11%, and the same 3% took 27%. That’s the trade with a tip-out on sales: the support staff get paid for the work they did, and you carry the risk of the table that stiffs you.

What’s normal, role by role

No law sets these numbers, and every house writes its own. These are the ranges you’ll run into most:

Check size moves them. A fine-dining room with big checks can run a low percent of sales and still pay the support staff well. A café with small checks might skip tip-out and pool everything instead. If your total is well above 5% of sales, ask how it’s figured. A higher number isn’t illegal under federal law: the FLSA sets no limit on what you can be asked to put in a valid tip pool (Fact Sheet #15). It’s still worth knowing before you take the job.

What federal law allows

The rules are in the Fair Labor Standards Act and the Department of Labor’s Fact Sheet #15:

• Your tips are yours. Your employer can’t keep any part of them, and neither can a manager or supervisor. A manager can keep only a tip a customer gives them for service they provided directly and alone.
• On a tipped wage, the pool stays on the floor. If your employer takes a tip credit (pays you less than $7.25, down to $2.13), a mandatory tip-out can only include people who usually get tips: servers, bussers, service bartenders, counter staff.
• The kitchen only on a full wage. Cooks and dishwashers can share in a mandatory pool only if your employer pays at least $7.25 an hour before tips and takes no tip credit.
• The card fee, and nothing more. On a card tip, your employer can take out the card company’s fee for that tip, and no more. In California not even that (Labor Commissioner).

States can go further. Massachusetts lets only wait staff, service bartenders and other service employees share in a pool, and keeps managers out of it on any day they manage (M.G.L. c. 149, § 152A). Before you argue a point, read your state labor department’s page on tips.

When a tip-out on sales eats your tips

It happens with a tip-out on sales: a dead lunch, one big table that left nothing, and 3% of your sales comes to more than your tips. Your restaurant’s policy sets the tip-out. But the minimum-wage check uses what you kept: your employer can take a tip credit only for the tips you “ultimately receive” after the pool (Fact Sheet #15).

So the tip-out comes off before the weekly check, not after. If your wages plus the tips you kept don’t reach $7.25 for every hour you worked that week, your employer owes the difference. In the seven states without a tip credit, Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington, you get the full minimum before tips, so a bad tip-out costs you tips but never your wage.

How to check your own tip-out

1. Get the policy in writing: who’s in it, the percent, and whether it’s on sales, on drink sales or on tips.
2. Keep your check-out slip or POS report each night. It shows your sales, your card tips and the tip-out the system figured.
3. Write down what you tipped out and to whom. The IRS asks for that list anyway, and you report only the tips you keep (Publication 531). More in how to keep a tip log.
4. Once a month, divide your total tip-out by your total tips. If it keeps climbing past 30%, look at the nights: it’s usually slow shifts on a sales rule.

Logged the same night, a shift looks like this: