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Business Math: How to Split Tips Between Employees

In most restaurants across the country, servers receive the majority of tips. However, all of the restaurant’s employees are jointly responsible for the customer’s satisfaction and so most restaurants require that servers share tips with supporting staff.

After complying with the Department of Labor’s final tipping rules, methods to split employee tips vary, and there’s a formula for every scenario.

Employers may split tips pooled between the wait staff, kitchen staff, bussers, and bartenders. They might distribute this by a percentage, using the honor system, or by points. Whichever method the restaurant uses is usually up to the manager, and this applies to all staff members.

Percentages

Some restaurants require that the wait staff tip the supporting staff based on percentages. Again, the manager will set up these guidelines. Usually, the wait staff will give 10% to the bartender and then split another 25-30% between the remaining staff. You may choose to keep the percentages general, such as 25-35% to pay staff equally, or you may choose precise percentages. Please take a look at the example below to see how precise percentage splitting works:

The Seattle Times quoted this scenario for a single server:

Total sales food/beverage = $1,000

$150 gross tips (assuming a 15 percent tip)

$10 (6.7%) to the expediter (who controls the flow of food)

$20 (13.3%) to the busser (who clears and sets tables, and, hopefully, keeps your water glass full)

$15 (10%) to the bartender [My note: This is regardless of whether or not the bartender had a large number of people actually buying drinks from the bar. Sometimes bartenders can make pretty good tips all by themselves, other nights the bar is practically empty and the patrons stay at their tables. This percentage is independent of that.]

$8 (5.3%) to the hostess (who may or may not have seated you near the bathroom door)

$1.80 “tip charge” (1.8 percent of her total charged tips, paid back to the restaurant to cover the fee they’re charged for $100 of charged tips. Note: This practice is common though not widespread)

Pools and Points

When you choose to pool tips, the manager must collect 20-100% of each server’s tips and divide them accordingly to supporting staff. The distribution will be based on percentages. Many restaurants pool 100% of tips, which helps ensure that everyone makes decent tips – i.e. no one has a great night and, likewise, no one goes home with a terrible night either. This egalitarian philosophy helps ensure that everyone comfortable.

The point system is an easy way to calculate the percentages owed to everyone. It might look like this:

Servers -10 points

bussers – 5 points

bartenders – 5 points (bartenders share their own tips behind the counter too, usually equally)

Example:

If three servers brought in $750 and there was one busser and two bartenders, the split would be:

Three servers x 10 points (30), one busser x 5 points (5), two bartenders x 5 points (10). Total points is 45. So divide 750 by 45 to get 16.6. Each point, then, is worth $16.6. Now you will multiply $16.6 by the number of points relevant for each person. So in this example, the servers get $166, and the busser and bartenders each get $83.

Splitting Tips Based On Hours Worked

Sometimes tips need to be split according to how many hours servers work. In many restaurants, a couple of the servers go home after the rush. So it wouldn’t be fair to the full-shift servers to split the tips they make after the part-time servers leave. There is a formula for splitting tips among part-time servers when tips are pooled.

SHARE= (TIPS / TOTAL HOURS OF ALL SERVERS) X HOURS OF SERVER

Pooled tips between all servers (A,B,C) = $500
A works 8 hours
B works 6 hours
C works 4 hours

Total Hours of all servers = 18

A’s tip = (500/18) X8 = 222
B’s tip = (500/18) X6 = 166
C’s tip = (500/18) X4 = 111

Once this is distributed among the servers, any further percentages may be calculated for the supporting staff.

Split Based on Hours Worked After Pools, Points, and Percentages Are Applied

Not all waitstaff factor in hours worked by the teammate with whom they are splitting tips but some do because some consider it unfair to give an employee the full amount if they only worked a 4 hour shift and the wait person worked 8. If you do want to factor in hours worked, there is an easy way to do this. First, figure out how much you would give the employees based on the formulas above. Then, figure out the percentage of hours that the employee worked in comparison to yours. So if you worked 8 and he worked 4, then he worked 50% of the hours you did. If you are taking hours worked into consideration when splitting tips, then you would give the employee half of your original figure.

If the number is not so easy as 50%, figure out the percentage this way:

Divide the employee’s hours (the lesser of the two) by the number of hours you worked. If you worked 9 and the teammate worked 4 then you’ll give the teammate 44% of the previously derived figure. To find 44% of this figure, simply multiply .44 by the figure. So if you figured that you were going to give the employee $12 then take 12x.44=5.33 and give the teammate $5.33.

Tread With Care!

Any one or combination of these calculations may be standard in one restaurant but not in another. It was my experience working as a server in college that certain tip splitting practices can be looked down upon by some. I worked in a couple of sports bars where we didn’t use any of these formulas and we were just expected to be “cool” in the amount we tipped supporting staff. Personally, being kind of a numbers geek, I would have preferred to use a formula but all of the employees there thought that formulas were too impersonal.

In general, be careful not to use formulas that aren’t followed by all the staff in the restaurant. Restaurant employees can get pretty upset when they feel they are not getting their fair share of their hard earned money. This goes for the waitstaff who are paying out and also for the bartenders, busboys, and kitchen staff.

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  • 65 comments

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65 Responses

  1. How do you share tips in a small pizza shop when we only have counter service, no table service. We have 9 employees total, 5 on at any one time, and daily tips are only about $30? What about the owner who works 12 hours a day, 7 days a week, why doesn’t he get any tips????

    1. This sounds a lot like a coffee shop situation where customers give tips to the employees working behind the counter. Tips are split between employees in a coffee shop equally between all hourly employees. Managers and owners typically don’t share in the tips because they make higher wages.

      1. Tim hortons does not share tips evenly I work 8 hrs help out on front counter when needed and never get a full tip out.if they make 17 dollars a day I only get 7.is this fair .not to me it isn’t

      2. Do you know of an app that lets you in enter in all the info and it calculates everything for you?

        1. Hi Chad.

          Just read your comment. I’m one of the cofounder’s for Tipmetric.com which is a web app that “lets you in enter in all the Tips collected and it calculates everything for you?”

          The web app is currently in private beta but if you are still looking for a solution I would be happy to give you an account to give the app a test run and see if it can help out.

          Let me know…
          WIlfred.

          P.S. Still working on the landing page 🙂

    2. I wonder the same thing! What I offer is as being a food runner/anything the customer needs/ busser I average about 25 hrs a week while being paid 5.03 an hour plus tips usually make about 20 a day in tips…..it is said in my position I make almost 10$ an hour my luck I’m always stuck as closer which mens a higher tip percentage to me. The more hours and the ability to chalk up the work and know everything that is done is being done for the better that is what makes the customers happy and happy witholidays ourselves as servers because there is always room for improvement and in this line of work means more appreciation = more tips!!!!!!!

    3. Because it’s illegal for an owner or manager to take employees tips. At least in California.

      1. Its actually Federal Law that managers cant participate in any tip pool . Also for this has a lot of draw back like if you have ti tip out kitchen staff then the restaurant has to give the servers the full minimum wage Not the tipped wage.

        1. Managers are allowed to be tipped in Las Vegas. Not sure if that is all of Nevada or just that city, but due to a lawsuit with one of the big hotels, it is now allowed.

    5. Has anyone created a simple spread sheet for this method?
      SHARE= (TIPS / TOTAL HOURS OF ALL SERVERS) X HOURS OF SERVER

      Pooled tips between all servers = $500
      Server A works 8 hours
      Server B works 6 hours
      Server C works 4 hours

      Total Hours of all servers = 18

      A’s tip = (500/18) X8 = 222
      B’s tip = (500/18) X6 = 166
      C’s tip = (500/18) X4 = 111

      Once this is distributed among the servers, any further percentages may be calculated for the supporting staff.

  2. this is great if all the employees work the same hours and shift. how do you combine the values of hours AND points. I share a shift with a bartender and tip out my busboy. Our point value is 6 for the bartender and 4 for the busboy. However, we don’t all work equal hours. So what’s the formula for figuring out money due to each person based on their hours worked and their point value?

    1. Hi Michael. I added a new section to the post in response to your question. Hopefully this helps!

  3. I am trying to create an excel spread sheet with a pool system. I want to be able to input the nightly tip total and have the total divided among the servers and server ast’s automatically. What would the needed formula be? Example Total nightly pooled tips is $1,500.00 each servers point is 10 each server ast is 5. What formula do I put in excel to have the money divided for total nightly points then multiplied by the workers value? Thank you

    1. That’s a great question. Hopefully this page from Nolo Law for All helps answer your question:

      “Many states allow employers to require tip pooling. All employees subject to the pool have to chip in a portion of their tips, which are then divided among a group of employees. An employee can’t be required to pay more into the pool than is customary and reasonable, and the employee must be able to keep at least the full minimum wage (that is, the employee can’t be required to pay any part of the tips the employer is counting towards the minimum wage into a tip pool).

      Only employees who regularly receive tips can be part of the pool. Employees can’t be required to share their tips with employees who don’t usually receive their own tips, like dishwashers or cooks. And no employers are allowed in the pool: Tips from a tip pool can’t go to employers or, in some states, managers or supervisors.”

  6. I am a assistant manager at a restaurant and i am trying to come up with a better system than we currently have. we have a system for catering orders that tip on there card,and is distributed among all employees, morning or night, and also based on how many hours you worked in a pay period, it is then taxed and added to your pay check. i believe it is unfair because all the catering orders are done in the morning but the night crew also gets part of those tips. even tho they are not involved in anyway. is there a system that can calculate total tips and distribute it based off those who worked that day and received the tips for there work.

    1. Hi James.

      Just read your comment. I’m one of the cofounder’s for Tipmetric.com which is a web app “system that can calculate total tips and distribute it based off those who worked that day and received the tips for their work.”

      The web app is currently in private beta till end of September and if you are still looking for a solution I would be happy to give you a trial account to give the app a test run and see if it can help out.

      Let me know…
      WIlfred.

  7. At my coffee shop we split tips with everyone working. When someone new comes into work we split, when someone’s shift ends we split. That system is perfectly fine for me. My problem is one of my coworkers is only there to clean, she gets a 6 hour shift and all she does is clean. Reason for it is because she cannot speak English she is Italian. She doesn’t serve costumers nor ring them up. I don’t think it’s fair that when we have lines out the door and are busting our ass for hours to get the line out of the way that the people that were actually serving people have to split with someone that is just cleaning and helped in no way with the line.

  10. Work in restaurants where we only tip out bartender But it’s 10 Percent if our gross sales even if the bartender doesn’t make drinks for our guests Should it not be 10 percent of our acohol sales?

  11. I am Busser ( captain) in one of the night
    club And we have a very small team
    2 server1-2 bartenders 2-3 Busser
    including bar back and our pool was
    Server and bartender 6 pint
    Bar back and Busser 4 points
    Becouse bar back and Busser
    Start at 8:30 pm
    And barback and server start at 10-30 pm
    Server and bartender don’t do any any side work including setting the whole bar and
    club and closing, Now my new GM seted
    Up 23% of the tips for Busser and barback
    Now if 2 us work we make 11.50 per 100
    if 3 of us work we make 7.66 per 100
    While server make 25.66 per 100
    if 3 of them or 19.25 if 4 of them
    Basically we make way less half of what
    They make, is this fair ??
    Can they do Two separate pool( 77% pool between server and bertendet) (23% pool
    Between Busser and barback) in the
    the same house?

  12. So is it actually a tip pool violation to share tips evenly when not same hours are worked? Even of its an hour or two more or less? If so what action shod I take? San Antonio TX

  14. I work at a spot where the cashiers get the credit card tips and get paid the full minimum wage this can’t be right and the waitress get paid 2.13 and don’t get any credit card tips and if they do it goes to the cashier

  15. If we use a tip pooling system and a couple of servers come in later than everyone else because they cannot come in at the beginning of the shift because of other obligations, is it wrong to dock them a point? Should we be consistent and also include servers that come in late and dock them as well?

    1. Instead of docking them a point your tip pooling system should include hours worked. For example if Tom works 8hrs and John comes in late and only works 7hrs then Tom will take home more tips than John because the Tip Pooling system is weighted by hours. This keeps it fair for everyone. For a system that does this, please see TipMetric.com

  16. I work in a fast food restauranrt..im having trouble evenly distributing our tips.
    I have some employees who work 40hrs a week and other who only work about 25 hours aweek.plus I have a prep cook who gets tips.how do I evenly distribute them so that not everyone is getting the same amount,i hand out tips at end of the month.thanks

    1. Hi Travis.

      Just read your comment. I’m one of the cofounder’s for Tipmetric.com which is a web app that “lets you enter in all the Tips collected + Hours and it evenly distributes them so that not everyone is getting the same amount.”

      The web app is currently in private beta but if you are still looking for a solution I would be happy to give you an account to give the app a test run and see if it can help out.

      Let me know…
      WIlfred.

  18. Is it legal for an employer to take 12% from employees tips for tax purpose and also 2.5% for credit card tips?

  19. We are a big famous restaurant.
    Before we were using percentuage system and was kind of fine, so the owner decided to switch to points system.
    Is it normal that a waiter takes 1.0 and a hostess 0.8??
    We are all unhappy, there is anything that can be done?

    1. Hi Enrico,

      One system is not inherently superior to another. It depends on the percentage or points assigned per position that are being used to calculate the tip-outs

      I would probably suggest you do some sort of simulation of the 2 different systems with different percentage or point values to make sure you get the exact same tip-outs no matter which system you are using(points / percents).

      You can check out TipMetric.com to help out with this simulation or reach me directly @ [email protected].

      Best,
      Wilfred

  20. My daughter is a bartender she makes 7.50 per hour and tips are on a point system. If she doesn’t need help she gets 1 point and if a manager steps in he gets the full poi t and she gets 1/2 a point. She keeps track of everything, she received her paycheck made a total of $950.00 dollars came home with 500.00 they told her they take of 34% off the top for taxes is this correct? I need to be able to understand this and help her at the same time.

    1. Hi Angelique. For specific tax questions you should consult with a tax professional.

  21. i would assume that her cleaning would include any of the equipment you are using to make the coffee drinks? Imagine if you had to take care of your huge line and then not have equipment clean and ready to make all the coffee drinks. I say share the love and be a team.

  22. I’m trying to find information on how our pooled tips are distributed. It’s a “point system” example: server A is at 1 & server B is at .5 (both doing the same job & same hours) get a $30 tip.. A gets $20 & B gets $10. Can an employer do this in NYS? I was informed a week after start date that it’s a probation period & will be moved up within 2weeks, ok fine, now 5weeks later & nothing! Also assist. Manager is at $13.50/hr & is doing same job & is getting tips, is that”legal”? Please any advice would be great!

    1. I’ve done research, and it looks like the state of New York does allow employers to implement any type of tip sharing/pool system. Managers are technically not supposed to be a part of the tip pool because they typically get paid a higher wage than other employees. However, the law doesn’t define exactly what a manager is, so they can take tips.

  23. What would be the easiest and most fair way to split up the tips between one bartender, one server and one cook. I manage a golf course restaurant, and we are struggling with finding a uniform platform that allows the cook to be tipped and the server and the bartender to either split their tips, keep their own,… something that makes Sense. There are only a handful of tables and the only nights the dining room is busy is Monday through Friday for leagues. I’m just really struggling with coming up with a solution that fits everyone’s needs. Also the bartender and server are payed minimum wage and above hourly.

  24. Hi I work in a high end restaurant as a bartender. They have now moved to an hourly system. I don’t know if this I illegal or not. Myself and another co bartender are considered “mains” the shift starts at 4 and we typically don’t call the “third” bartender (essentially a bar back) up until usually 7:30-8 and they work until about 9:30. Close at 10 and don’t finish with our last guest until 11. However these third gets paid based on ALL of the money made when they were only up there for 2 hrs. How are they entitled to a huge tip that only myself and the other main made. It’s UNFAIR

    1. Technically your employer can choose to split tips in any way that he desires, even if it seems like it might be unfair. Your employer may want to consider splitting tips by hours worked instead of pooling everyone together.

  25. Hello! I work in a restaurant and I would like to find out how to build an formula for our tip out.
    We have a pool system and I would like to know how should I do the maths for cash tips and credit card tips. We tip out the bussers 20% of our total tips.Im desperate for help thank you.

    1. Hi there. First, you’ll need to add the tips together from the cash and credit card tips. Once you have the total, you can then disperse that among your employees. Let’s say that you take 100% of the tips and divide it among all employees. Your bussers only get 20%, so you will take 20% of your 100% total and divide that up evenly for each busser. For example, let’s say that you ended up with $600 in tips for the night and you have 3 bussers: $600 X .20 (20 percent)= $120. This means that 20% of the night’s tip earnings total up to $120. Now, you need to disperse the $120 to all bussers evenly… $120 / 3(bussers)= $40. Each busser would get $40.00 each.

  26. I have a unique situation. I work in more of a “bistro” setting where the servers actually make above minimum wage plus cash and credit card tips. For months we have been going by a certain system, where anytime a server comes or goes we divide the tips that are brought in during that time period and split evenly. My manager now wants to change that and base it off of total hours worked. Is this even fair? Essentially I could be in the building busting my butt during peak times but more of the tip money will go to another server because they are technically in the building longer. I don’t feel this is an ok system, just because you do more hours ( not all work is during open hours, bringing in money) doesn’t equate doing more work to earn tips. They claim this is more fair, but I actually think it’s quite the opposite. What’s fair is getting tipped out during the shifts you work…

    1. Hi, there. Technically your employer can choose to split tips in any way he or she pleases. The Department of Labor only requires a valid tip-pooling system, which looks like this: “Tip Pool: The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers, and service bartenders. A valid tip pool may not include employees who do not customarily and regularly received tips, such as dishwashers, cooks, chefs, and janitors”

  27. I work in a bar in Washington state where I am the waitress, bartender, busser etc. And am required by my manager and owner to give my cooks half of my tip if the ticket had any food on it. Is this legal for them to mandate 50% to be given, regardless of whether they had a full meal or just an order of fries?

    1. In the state of Washington, your employer is allowed to require any sort of tip pool, as long as it doesn’t include individuals that are exempt from being considered an “employee”. This means that your tips cannot be shared with any manager or supervisor. Upon my research, it looks as though your tips can be split with the cooks and your employer can place any sort of tip pooling policy.

  28. I am taking over a small restaurant that staffs 2 cooks and 2 waiters. Due to the limited seating space, vast majority of the customers get take home orders and pay with credit cards. I’d like to split all the tips evenly between the 4 staffs. While pooling cash tips is easy, how do i go about splitting tips left on credit, debit cards? Do i add up the total credit card tips and then add it to their paychecks? It would be difficult to keep enough cash on hand to pay employees for credit card tips since most orders pay with cards. also some additional info; we only have 5 tables, the waiters are not assigned to specific tables. They will switch between helping seated customers and working behind the counter. I go through Costco Wholesales for merchant services and i believe they are charging almost 2% per trans action so i have to keep that in consideration. We will be using Verifone vx520 card machine. Any suggestions you have will be grateful. Thank you.

    1. Hi Thomas. Most restaurants just look at the receipts for the day and give their employees cash back for the money earned. Since you do not want to do that, you will have to process all of the tips earned on your machine, calculate the total, and split the tips from there. Keep in mind that some EMV chip cards process differently, which means that you may not even get the tips from some tables because their bank’s processes. It’s entirely up to you if you want split tips after you process the cards and add the tips to your employees’ paychecks. You will just have to process the transactions first to see what your actual total is.

  29. The bar I work at has two bars- inside and outside. We split tips 50/50 right now but 9 times out of 10 the outside bar makes A LOT more! For instance the other night I made $232 and inside did $60! We did a 50/50 split and that sucks!! I’ve been talking to the owner on trying to figure out a way to be more fair in the splitting of tips on nights like that. Any recommendations?

    1. I believe your employer probably splits tips this way to ensure that no one is leaving work feeling financially unstable, however, I can see your concerns. Have you thought about splitting differently? That night you guys made a total of $292, and since you split the tips 50/50, both bars ended up with $146.00. In that situation, your outside bar is losing $86 in tips because you had to total up tips and then split. Instead of splitting 50/50, can both bars split what they each made individually? Let’s say there were 3 people working at your bar and you all made a total of $232 that night. Instead of splitting it with the bar inside, you can divide the total tips among the 3 bartenders outside rather than the bar inside. So, you can either split the tips based on the individual bars, or you can change the percentage. Instead of a 50/50 tip, maybe you can split 60/40?

  30. I know how to split tips, my main concern is how often they are to be distributed. Its different in many states as Arkansas, they must split and hand out either the same night or the next morning. I’m in Oregon and we used to do it nightly. But now he changed it to where we dont even get them till the end of the week! Which is hard to be able to calculate what I actually make because we can’t get the right numbers till the end of the night which some of us dont always work. So I was wondering it is legal in oregon for them to hold out our tips for a whole week!

    1. Oregon law only requires employers to pay employees at least minimum wage when they’re tipped. When it comes to tip pooling, they don’t have any laws prohibiting any sort of tip distribution. Oregon follows the federal guidelines for tip arrangements, and the federal law does not have any requirements for tip pooling distributions– they only have rules in regards to the amount, who gets tips, and tip credits. To read more information about Oregon law and federal law, go here: https://www.dol.gov/whd/regs/compliance/whdfs15.pdf, https://www.oregon.gov/boli/TA/Pages/FactSheetsFAQs/Restaurants.aspx

  32. Hi! I am thinking in leaving 1 or 2 points as bonus for punctuality, sales average, etc. Just not sure yet how to divide that bonus between waiters, cashier or bar since cashier and bar ar as important as servers because they are in charge of delivery.

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