For any restaurant with a decently large staff, tipping is sure to be a hot topic. Depending on how you have your employees classified and your payroll set up, tipping could likely be the number one source of income for them. As an employer, it’s important to have a setup where all employees are fairly compensated for the work they do. For many restaurants, tip pooling or shared gratuities may be the right answer.
Tip pools and shared gratuities are a way to ensure that everyone on your staff has a chance to be rewarded for great service, and promote collaboration and support with your whole team. It helps make scheduling easier and less competitive, and reduces tension between employees. However, problems can arise when your tip pool policy is not set up correctly, which can lead to lawsuits from employees treated unfairly and legal issues with labor authorities. Let’s take a look at your risk when using tip pools and shared gratuities, and what you can do to reduce that risk.
How Tip Pools & Shared Gratuities Can Get Restaurants In Trouble
Problems from shared tip policies can arise from several reasons. One of the most common risks is including staff in tip pooling who are not allowed to be. By law, supervisors and managers are not allowed to participate in the pool, even if they spend most of the shift serving or performing other duties that are traditionally tipped for. The only exception is when that employee is working a shift where they are performing tipped duties the entire time, and not doing any supervisory tasks.
Another key issue can come from how tip pools and shared gratuities are tracked. Without the proper reporting and tracking, restaurants can face issues from labor regulators, and can even be penalized on their taxes. Additionally, you’ll want to have a good recording system for tip pools to make sure that each employee gets their fair share and is not shorted. Employees who are not paid the tips they earned can sue restaurants for more than their missed income, so it’s important to make sure that everything is carefully tracked and reported.
Ways Restaurants Can Reduce Their Risks From Tip Pool Issues
Tip pools are still a great way to support your staff, but there are a few considerations that you should implement to make sure that everything goes smoothly
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Have a written policy that all staff review and acknowledge
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Include rules for who can and cannot be included
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Include conditions for extra sharing between staff and policies for special events or large groups
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Have a system for documenting, reporting, and distributing pooled tips in an efficient way
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Make sure that tip credits are being considered, and that only typically tipped employees can participate in the pool (unless all employees are being paid at or above minimum wage)
Protect Yourself From Tip Pool Liability With Restaurant Insurance
Even with a carefully crafted policy and accurate tracking, your business can still face lawsuits from employees and labor agencies. That’s why it’s important to make sure that your restaurant has the coverage it needs. Strickler Insurance is here to protect your business. With over 150 years of experience helping businesses in the Lebanon, PA area, Strickler can help you find great restaurant insurance, business owner’s insurance, cyber liability insurance, employment practice liability insurance, and much more. Contact Strickler Insurance to get a free restaurant insurance quote today.
