Tip Pooling & Sharing: The Complete Guide for Restaurant Owners

Between different roles, hours worked, and legal requirements, it’s easy to feel overwhelmed.

In this blog, you’ll explore everything you need to know about tip pooling and tip sharing—from how they work and the laws that apply to common tip-splitting methods and tools that make it all easier.

After all, having the right tip structure in place keeps things fair, transparent, and running smoothly.

Let’s dive in.

The Basics On Tips & Tipped Employees

What are tips?

The Internal Revenue Service (IRS) defines tips as “discretionary (optional or extra) payments determined by a customer that employees receive from customers.” So unlike wages set by the employer, tips are given by customers voluntarily as a reward for good service.

Tips can be received in various forms, including:

• Cash tips received directly from customers
• Credit card or debit card tips added to the bill
• Tips collected through a gift card 
• Other non-cash items of value, such as tickets

Who can receive tips?

Under federal law, tipped employees are those who customarily and regularly earn more than $30 per month in tips.

Common tipped positions in restaurants include:

• Servers
• Bartenders
• Bussers
• Food runners
• Counter service employees

Kitchen staff, dishwashers, and managers typically do not receive tips unless included in an employer-mandated tip pooling system, which must comply with tip pooling laws under the Fair Labor Standards Act (FLSA).

What is tip credit?

The tip credit is a legal allowance under the FLSA that lets employers in many U.S. states pay tipped employees less than the standard minimum wage, as long as their tips make up the rest.

In simple terms: If a tipped employee doesn’t earn enough in tips to reach the full minimum wage, the employer is legally required to make up the gap.

For instance, if the minimum wage is $7.25 per hour and the tip credit allows paying $2.13/hour, the employee must earn at least $5.12 per hour in tips. If they don’t, the employer must cover it.

Tip Pooling & Tip Sharing Explained

What is tip pooling?

So, how does tip pooling work? Tip pooling is a system in which tipped employees contribute all or some of the tips they’ve collected to a shared pool. The pool is then divided among eligible employees at the end of a shift based on a predetermined method, often equally or according to job roles and responsibilities.

What is tip sharing?

Tip sharing (sometimes called ‘tipping out’) is a less structured approach in which tipped employees directly share a portion of their individual tips with other employees who support service but may not interact with customers as much.

In most cases, servers and bartenders keep the majority of their tips but tip out a percentage to food runners, bussers, or bartenders. 

The Difference Between Tip Pooling vs Tip Sharing

While both tip pooling and tip sharing involve redistributing tips among employees, they differ in how tips are collected, who contributes, and how they are divided.

Key differences at a glance:

	Tip Pooling	Tip Sharing
How tips are handled	Tips are combined into a shared pool and redistributed	Individual employees distribute a portion of their own tips
Who contributes	All tipped employees	Primarily servers and bartenders
Who benefits	May include both front- and back-of-house staff	Typically support staff (bussers, food runners, barbacks)
Structure	Employer-managed and structured	Employee-driven, often based on informal agreements

Tip Pooling Laws You Need to Know

As a restaurant owner or manager, understanding the legal framework surrounding tip pooling is key to staying compliant. In the US, the Fair Labor Standards Act sets the foundation for how tips can be distributed, but keep in mind that state laws—and even country-specific laws—can vary widely.

Federal Tip Pooling & Tip Sharing Laws (FLSA Guidelines)

• Tip ownership: Under federal law, tips belong to the employee who receives them. Employers cannot keep any portion of an employee’s tips, even if they take a tip credit. 
• Tip credit & minimum wage: Employers can pay tipped employees a direct wage of $2.13 per hour, as long as their received tips bring their total earnings to at least the full minimum wage of $7.25 per hour. If tips do not make up the difference, the employer must cover the shortfall. 
• Traditional tip pooling: Employers who claim a tip credit can require tip pooling, but only among customer-facing tipped employees, such as servers, bartenders, and food runners.
• Non-traditional tip pooling: If an employer does not take a tip credit and instead pays all employees the full minimum wage, they can require both tipped and non-tipped employees, such as cooks and dishwashers, to participate in a tip pool. 
• Manager & supervisor restrictions: Managers or supervisors cannot keep tips another employee receives, even if they occasionally perform tipped duties. 
• Recordkeeping requirements: Employers are responsible for keeping accurate records of all tips received, including the total amount, how they are distributed among employees, and whether a tip credit is being applied.

State Tip Pooling & Tip Sharing Laws

While the FLSA establishes federal guidelines, state labor laws may impose stricter requirements. Key state-specific regulations include:

• Tip credit restrictions: Some states, such as California, Oregon, and Washington, prohibit tip credits, meaning tipped employees must receive the full state minimum wage before tips. 
• Mandatory tip pooling policies: Some states, like New York, require employers to provide written tip pooling policies outlining how tips will be collected and distributed. 
• Higher minimum wages for tipped employees: Many states require higher base wages for tipped employees than the federal standard. For example, Massachusetts and Colorado set a higher tipped minimum wage than $2.13 per hour. 

To ensure compliance, check both federal and local labor laws and consider consulting your state labor department or a legal advisor.

Tip Pooling Laws Outside the US

If you operate internationally or are curious about how tipping works elsewhere, here’s a quick snapshot:

• United Kingdom: Tips must go directly to employees unless there’s a clear written policy that states otherwise.
• Canada: Tip pooling is legal, but employee consent is required in most provinces.
• Australia: Tips belong to employees. Employers are not allowed to deduct a share for business purposes.

Choose the Right Tip Structure for Your Restaurant

Th]ere’s no one-size-fits-all approach to tip distribution among restaurant employees. Every restaurant is different and the right system depends on your team’s size, service style, and what feels reasonable to your employees. 

When done right, a clear and consistent tip structure can boost morale, reduce turnover, and make employees feel truly valued.

Let’s break down the pros and cons of tip pooling and tip sharing, plus some common methods for splitting tips fairly.

Pros & Cons of Tip Pooling & Tip Sharing 

Both tip pooling and tip sharing have their benefits and their drawbacks. Understanding how each system works can help you choose the one that fits your restaurant best.

Here’s a quick breakdown:

Tip System	Pros	Cons
Tip Pooling	– Encourages teamwork and shared accountability- Keeps everyone motivated to contribute to good service- Makes sure support staff like bussers and runners are rewarded- Helps reduce competition between servers	– High-performing servers may feel they’re not being rewarded fairly- Can cause tension if the system isn’t communicated clearly
Tip Sharing	– Tips are more directly tied to individual performance- Simple to manage with smaller teams- Encourages accountability	– Back-of-house and support staff may be left out- May lead to inconsistent or uneven distribution

Keep in mind that transparency is the most important factor. Whatever system you choose, make sure your employees understand how it works and why.

Common Tip Splitting Methods & Policies

Once you’ve decided between tip pooling and sharing, you’ll need to decide how to split tips between employees. Prior to implementing a tip pool policy, make sure that it complies with federal and state regulations governing your restaurant locations. 

Here are some of the most popular ways:

1. Even split

An even split is the most straightforward way to distribute tipped earnings. Everyone gets the same amount, regardless of role or hours worked.

For example, if your team of 4 employees collects tips that total $400 during a shift, each person gets an equal share of the tips:

$400 ÷ 4 = $100 each

This method works best for small, close-knit teams where everyone contributes equally to the guest experience, like in fast-casual or counter-service restaurants.

Keep in mind, though, that this approach may not feel reasonable if some restaurant employees worked longer hours or took on more demanding roles during the shift.

2. Based on hours worked

This method divides the total tip amount based on how many hours each employee worked during a given shift. 

For an example of how to calculate tips per hour, let’s say two employees worked the same shift and collected a total of $200 in tips. One employee worked a 6-hour shift and the other 4 hours, so for a total of 10 hours.

To split the tips:

• Divide the total tips by total hours: $200 ÷ 10 = $20 per hour
• Multiply by each employee’s hours:
  • Employee A: 6 × $20 = $120
  • Employee B: 4 × $20 = $80

It’s one of the simplest ways to split tips, especially in fast-paced environments where all team members contribute equally, regardless of their specific roles.

3. Based on set percentages

With this method, tips are split by assigning fixed percentages to each team member’s role. It’s commonly used in full-service restaurants, where front-of-house and back-of-house employees work together to create a great customer experience.

For example, suppose your restaurant brings in $500 in total tips for the night. You’ve decided on the following breakdown:

• Servers: 70%
• Bartenders: 20%
• Bussers or support staff: 10%

To distribute the tips:

• Servers get $500 × 70% = $350
• Bartenders get $500 × 20% = $100
• Bussers/support get $500 × 10% = $50

This method works well when each role has a consistent impact on service and helps promote fairness across the board.

4. Using a points system

The points system assigns a value to each role based on responsibilities, experience, or contribution to service. At the end of the shift, tips are divided based on the number of points each person has.

For example, your team earns $300 in total tips during the shift. You assign points like this:

• Server: 5 points
• Bartender: 3 points
• Busser: 2 points

Add up the total points: 5 + 3 + 2 = 10 points

Now divide the tips:

• Server gets 5/10 of $300 = $150
• Bartender gets 3/10 of $300 = $90
• Busser gets 2/10 of $300 = $60

This method is especially helpful for larger teams or more complex service models where equal splits don’t always reflect the work being done.

5. Weighted tip pooling (hybrid approach)

This approach combines elements from different tip-splitting methods—most commonly a points system and percentage-based split—to create a more balanced distribution.

Tips are pooled and distributed based on the weights assigned to each role, which are sometimes adjusted by the hours worked or points earned during the shift.

For example, you might assign 60% of the total tip pool to servers, 25% to bartenders, and 15% to bussers and then divide each group’s portion based on the hours worked or performance points.

This method gives you flexibility while still ensuring appropriate compensation based on each employee’s contribution and role.

Connecteam’s Free Tip Pooling Calculator

Figuring out how to split server tips can get complicated—especially when different roles, shift lengths, and distribution methods come into play. That’s where a calculator, like Connecteam’s Free Tip Pooling Calculator, can save the day. 

Whether you’re dividing tips by hours worked, using a percentage-based split, or assigning points per role, the calculator does all the heavy lifting for you. Just plug in your team’s shift details—like hours worked, total amount of tips, and roles—to instantly calculate how to divide tips fairly.

Simplify Tip Management and Restaurant Operations with Connecteam

Managing tip pooling and sharing doesn’t have to be a hassle. Connecteam streamlines tip distribution and simplifies your daily restaurant operations, all within one easy-to-use app.

• Efficient Scheduling: Create perfect schedules with ease, based on roles, employee availability, and labor budgets. Avoid shift conflicts and ensure optimal coverage every day.
• Real-Time Communication: Keep everyone aligned with instant team updates, one-on-one or group chats, and easy recognition for outstanding team performance.
• Clear Task Management: Assign and track shift tasks, daily checklists, and prep lists all from one place, reducing confusion and boosting team productivity.
• Easy Training & Onboarding: Offer quick, mobile-friendly training materials accessible anytime and anywhere. Accelerate onboarding and maintain high service standards effortlessly.

With Connecteam, you save time and reduce stress—so you can focus on delivering exceptional service and maintaining a motivated, satisfied team.

Get started with Connecteam for free!

The Bottom Line on Tip Pooling & Sharing

At the end of the day, a clear and fair tip distribution system isn’t just about numbers—it’s about keeping your team motivated, valued, and engaged. Whether you choose tip pooling, tip sharing, or a hybrid model, the key is transparency, consistency, and communication. 

And with tools like Connecteam’s Tip Pooling Calculator, managing tips becomes simple and headache-free—for you and your staff.