Tip Pooling & Tip-Out Math, Explained
Worked example
Suppose a shift collects $600 in tips. The pool shares among 3 servers (1 point each) and 1 busser (0.5 points) — 3.5 points total:
| Role | Points | Share of $600 |
|---|---|---|
| Server A | 1.0 | $171.43 |
| Server B | 1.0 | $171.43 |
| Server C | 1.0 | $171.43 |
| Busser | 0.5 | $85.71 |
Each point is worth $600 / 3.5 = $171.43. A tip-out to the bar or busser is simply allocated points before servers divide the remainder.
Rules that protect workers
- Managers and supervisors may not keep pooled tips (federal FLSA).
- Tip pools may include only customarily-tipped employees.
- The federal tip credit (lower cash wage) requires most time in tip-producing work.
- State laws can be stricter — e.g., some states ban tip credits entirely or limit pooling.
Frequently Asked Questions
Who is allowed in a tip pool?
Under the federal Fair Labor Standards Act (FLSA), valid tip pools may include only employees who customarily and regularly receive tips — typically servers, bussers, bartenders, and hosts. Employers, managers, and supervisors may not keep any portion of a tip pool.
What is the 80/20 (or tip-credit) rule?
The federal tip credit lets employers pay a lower cash wage to tipped staff, but the employee must spend at least 80% of their time on tip-producing duties (and no more than 20% on side work like prep/cleaning) for the full tip credit to apply. The exact allocation rules have changed over time, so verify the current DOL guidance.
Are mandatory service charges the same as tips?
No. A mandatory service charge (e.g., 18% on large parties) is generally employer revenue, not a tip, and is treated differently for tax and tip-pool purposes. Voluntary customer tips belong to the employees.