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tipping in restaurant with glass

Tip pooling—the process of gathering up the tips from all tipped employees and distributing them in a pre-defined way among all non-managerial staff—is, well, confusing for most people. Before we can get into the pros and cons of tip pooling, you have to figure out whether or not you’re legally allowed to pool tips at your restaurant in the first place.

What Is Tip Pooling?

The first thing to know is that, at the federal level, the Fair Labor Standards Act (FLSA) act allows for tip pooling as long as employees receive enough tips to meet hourly minimum wage requirements. The next thing to figure out is what your state and local laws allow because restaurant tip pooling laws vary by state.

Tip pooling laws in Arizona, for example, are a go while places like Minnesota don’t allow restaurants to require tip pooling—instead, the choices is left up to employees.

Now, if you’re in one of the states that allow for tip pooling and you’re trying to figure out how to handle tipping in your restaurant. In order to help you decide, we’ve compiled this handy list of the pro’s and con’s of tip pooling.

You can control the conversation and change the way guest communication is handled with proper staff training.

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The Pros of Tip Pooling

Some of the arguments in favor of tip pooling are:

  • It’s designed to function as an equalizer. As TigerChef explains, “since kitchen staff members do not receive gratuities, wait staff have an unfair advantage in the salary department; thus, tip pooling can essentially close the gap on salary differences.”
  • It can make a lot of sense in catering situations. “When shopping for a wedding or event venue, the pricing is broken down by room charge, meal and beverage cost, applicable taxes, and the service charge… at the end of the event, the service charge is divided between the servers,” explains Eater Maine.
  • It can function really well in team-focused environments. Eater also notes that “servers may agree between themselves to pool and split tips if they trust each other’s skills or if the night is going to be a yawner.”

Overall, tip pooling can emphasize the fact that restaurant work is teamwork at the end of they day. However, the success of your restaurant as well as your tip pooling scheme, depends on how well that team functions.

The Cons of Tip Pooling

On the other hand, the negatives about tip pooling are:

  • Although it’s designed to be fair, it doesn’t always work that way. “Some restaurant owners have been using tip pooling as an excuse to lower pay to below minimum wage for cooks, dishwashers, and bus staff—whoever will benefit from [pooled] tips,” explains TigerChef.
  • High performing servers can resent it. If they’re used to bringing in the big bucks thanks to their skills that stand out among the rest, it can result in lower take home tips at the end of the night for them. The result is dissatisfied high performers.
  • A few bad apples have ruined it for the bunch. There are horror stories out there about managers dipping into the tip pool (illegal) and owners redistributing tips in a way that saves a certain percentage for the house, so there’s an air of mistrust around tip pooling that could infiltrate your restaurant if you introduce the practice regardless of how ethically you administer it.
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Cinnamon is a Minneapolis-based freelance writer and journalist who paid a large part of her way through college and graduate school by serving. Her work has been published with outlets like National Geographic, the Washington Post, Pacific Standard, and more. You can read more about her at www.cinnamon-janzer.com.
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