Restaurant Tip-Out Laws and Best Practices
Tip-out, also called tip sharing or tip pooling, is the common practice in restaurants where servers share a portion of their tips with support staff like bussers, bartenders,hosts, and food runners. Understanding tip-out calculations helps servers know their true take-home earnings and ensures fair compensation for the entire team.
Federal Tip Pooling Laws (FLSA)
The Fair Labor Standards Act sets clear rules for tip pooling. As of 2024, these are the key federal requirements:
- Who can participate: Only employees who customarily receive tips (servers, bartenders, bussers, hosts)
- Management exclusion: Managers and supervisors cannot participate in tip pools or keep any portion
- Voluntary vs mandatory: Employers can require tip pooling, but only among tipped employees
- Tip credit: Employers taking tip credit must notify employees of pooling arrangements
Two Common Tip-Out Methods
Restaurants typically use one of two methods to calculate tip-outs:
1. Percentage of Total Sales
Tip-out is calculated based on your total sales for the shift. Common rates:
- Bussers: 2-3% of total sales
- Bartenders (if bar sales): 1-2% of total sales or 5-10% of bar sales
- Hosts: 0.5-1% of total sales
2. Percentage of Tips Collected
Tip-out is a percentage of your total tips. Common rates:
- Bussers: 10-15% of total tips
- Bartenders: 5-10% of total tips (or up to 20% if heavy bar service)
- Food runners: 3-5% of total tips
Example Calculation
Sarah worked a dinner shift with the following:
- • Total sales: $1,200
- • Tips collected: $240 (20% average)
- • Busser tip-out: 2% of sales = -$24
- • Bartender tip-out: 10% of tips = -$24
- • Host tip-out: 1% of sales = -$12
- ➜ Net tips: $240 - $60 = $180
Fair vs Unfair Tip Pooling
Legal tip pooling distributes tips fairly among customer-facing staff. Illegal practices include management keeping tips, forcing servers to pay for walkouts or breakage from their tips, or excessive tip-out percentages that effectively reduce wages below minimum wage.
Note: Tip-out policies vary widely by restaurant and region. Some states have additional protections beyond federal law. Always verify your restaurant's policy is legal and documented.
Frequently Asked Questions
Can my employer force me to tip out?
Yes, employers can require mandatory tip pooling as long as it only includes employees who customarily receive tips (servers, bartenders, bussers, hosts). They cannot force you to tip out managers or back-of-house staff like cooks.
What if I get stiffed (no tip)? Do I still tip out?
If tip-outs are based on sales (not tips collected), yes—you may have to tip out even if you weren't tipped. This is why sales-based tip-outs can be unfair during slow periods or with bad customers. Document these instances and discuss with management.
Can my boss keep part of the tip pool?
No. Under federal law, managers, supervisors, and employers cannot participate in tip pools or keep any portion of employees' tips. This is illegal and you can report it to the Department of Labor.
What's a fair tip-out percentage?
Industry standards vary, but typical total tip-outs range from 20-40% of tips collected or 3-5% of total sales. If you're tipping out more than 50% of your tips, the arrangement may be excessive.
Do credit card tips affect tip-out?
Credit card tips are treated the same as cash tips for tip-out purposes. Some restaurants deduct credit card processing fees (2-3%) before distributing tips, though this practice varies by state law.
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