Tips are a wonderful way for customers to acknowledge the level of service provided by a waiter, waitress, or another food service employee. And they're a pretty big deal to employees themselves. I've known my fair share of servers who have used their tips to fund college, vehicle purchases, and vacations...not to mention pay their daily living expenses.
But there has been quite a bit of misinformation floating around about how tips should be handled and plenty of high profile instances where employers illegally skimmed employee tips.
Here is a brief rundown of the fundamentals of employee tip pooling and sharing.
First, What Is Considered a Tip?
In general and as a default setting, employers should assume that the following types of gratuities always belong to employees:
- Tips made in cash
- Tips made during a credit/debit card transaction*
- Tips made by check
*State laws can vary and some states do allow employers to deduct credit card processing fees from tips prior to distributing them to employees. The Department of Labor (DOL) Wage and Hour Division offers more guidance: