How to: Designing a Fair Tip Pool System
Types of Tip Systems
Generally speaking in the restaurant industry, owners and managers choose between 2 systems to handle gratuities: tipping out, or tip pooling.
Both have their own merits. Tipping out tends to reward servers who are better with their guests or can sell higher cheque averages, but it can also lead to cattiness and servers fighting over tables.
On the other hand, tip pooling generally encourages cooperation among staff, as all tables are of equal value to every server. However, it can sometimes lead to frustration among the top-selling staff, as they feel they are 'carrying' the rest of the crew. This can be amplified in larger restaurants.
I've worked under both systems and personally, as long as the money is right, I have no problems with either. Fundamentally I think the cons of both have more to do with the management and hiring decisions rather than the systems themselves.
Regardless, this article will be focusing on the tip pool system. Surely tip pools are easy, right? Simply throw it all in a pile and hand it out evenly, presto!
If only it were so simple.
The Complications of a Fair Tip Pool System
Upon deciding to implement a tip pool system, you may discover it's more complicated than you initially thought. How do you handle staff that work less or more hours? Dividing it by the hours is a simple solution, but then how do you handle different roles? It's not fair for a new host or busser to get the same portion as your most senior, best-selling server. Sounds like a great way to lose staff.
The Points System
Enter: the points system. Under a points system, every position in the restaurant has a set amount of points earned per hour worked. Servers and bartenders typically sit at the top of the totem pole, and then server assistants, and then hosts, and then management, etc.
This allows you to allocate the tips based on hours worked, and also weighted by position.
Here's an example of how this might work on a night with a $120 tip pool (for simple math), with 1 server, 1 server assistant, and 1 host scheduled.
With this pool, you simply have to take the total amount made and divide it by the total amount of points earned by all staff. This gives you how much money is distributed for each point earned.
Total $ in Pool
24+12+4 = 40
$ Earned Per Point
120/40 = $3
After this, we simply have to multiply the points earned by each staff member by this $3 per hour value.
Total Pointed Earned
$ Earned Per Point
You might have to do some tweaking with the numbers to make this system make sense for your restaurant, but I do think this is on of the fairest ways to split a tip pool.
Sounds complicated, how will I figure all this out every week?
Luckily, I've got your back. I've whipped up this simple calculator for a former restaurant I managed. Click the image below to access, just be sure to make a copy. There is a tutorial about how to use it on the first sheet.
But what if there are errors?
Mistakes happen. Servers forget to clock in or out, and managers make typos on spreadsheets.
So what happens if there is a mistake after the tips have already been distributed? Luckily, with a tip pool system, you can fix these errors with the next round of tips.
You would simply copy the erroneous spreadsheet (make sure to keep the original for your records), and redo the duplicate with the correct numbers. The differences in the totals can now be considered when distributing the next round of tips.
Let's look at the above example if the Host actually worked 6 hours, instead of 4.
Total $ in Pool
Total Points (Corrected)
24 + 12 + 6 (extra 2 hours) = 42
$ Earned Per Point (Corrected)
120 / 42 = $2.86
Now, with this adjusted point value, we can figure out how much everyone was supposed to have made.
Total Points Earned
$ Earned Per Point
Total Tipout (Corrected)
With these numbers in hand, you can take the corrected amount away from the Server and Server Assistant the next round of tips. The host will get the extra to make up for the week they missed out.
This might seem like a downer for those that make a bit less than they expected this week. Just be sure to be honest with them and explain that they actually made too much the previous week, and that money belonged to their coworker.
Which brings us on the next topic:
Tip pools can be sketchy affairs. I've worked in restaurants where you simply throw your tips down a hole in a safe, and hope it works out. This lack of transparency is sure to sew seeds of suspicion among your staff.
To increase transparency, be sure to give a descriptive breakdown of hours worked with their duebacks.
Also, be open to being audited by your staff. This can be a tense affair if not completely and warmly welcomed. Keep your records for the past few tip-out cycles, and be friendly if a staff member asks to see the breakdown.
It is their money, after all.
If you are going to use a tip pool system, a points system allows you to distribute the money fairly by both position & hours worked. Use a calculator to reduce mistakes, and keep your records around to warmly welcome a staff member if they wish to see the breakdown of their hard-earned money.
Anything I missed? Any feedback about the tip pool calculator? Please let a comment below! 👇