[Important Update] What Restaurant Owners Need to Know About New Tipping Laws in Pennsylvania and New Jersey

It seems tipping laws are constantly in flux — and we have yet another update for you.

If you own restaurants in Pennsylvania or New Jersey, your state legislators have introduced several new laws that aim to protect servers, especially when it comes to tips. Take a look at these important new tipping regulations (and see how digital tipping technology can help you stay in compliance with the law).

Tips are the property of employees only

Have you been saving money by passing on the cost of credit card transaction fees to your tipped employees? This new rule might disrupt your business practices.

Both New Jersey and Pennsylvania have joined California, Maine, and Massachusetts in banning the practice of deducting credit card service fees from employees’ tips. Their state legislators clarified that tips belong only to employees — and therefore, cannot be garnished to cover credit card transaction fees.

New Jersey took it a step further, stating that employers may not deduct from employees’ tips for any reason. This includes:

Cash register shortages
Damaged or lost employer property
Purchasing uniforms
Any required tools or other items necessary for employment

Changes to the Tip Credit

New Jersey and Pennsylvania are also aiming to increase earnings for tipped employees, which means changes to the tip credit. Here’s a quick rundown of how it works in each state.

New Jersey’s minimum wage for tipped employees and the maximum tip credit will incrementally increase through 2024, ultimately resulting in an overall increase in employee compensation. Minimum tipped employee wages will reach $5.13 per hour, and the tip credit will rise to $9.87 per hour. These incremental changes will ensure that tipped employees earn at least $15 per hour — on par with New Jersey’s minimum wage requirements.

In Pennsylvania, the tip credit amount isn’t increasing, but restaurant owners have to meet new requirements in order to benefit from the tip credit. In the past, employers could pay tipped employees $2.83 per hour as long as employees earned at least $30 each month in tips — an undeniably low standard. Pennsylvania law now requires that employers can only take the tip credit for employees who earn at least $135 per month in tips.

Permanent 80/20 Rule

How much time do your servers spend on side work compared to time spent on direct service? You might remember the federal “80/20” rule, which stated that employers may only take the tip credit for employees who spend no more than 20% of their work time on non-tipped activities.

On the federal level, this ruling has gone back and forth during the past few presidential administrations, so Pennsylvania took matters into their own hands by permanently instating an 80/20 rule.

Making service charges more clear for customers

If your restaurant charges significant operational fees (for example: a 10% service charge to rent a private room or 15% for parties over 10 people), your customers may confuse that service charge for an auto-gratuity tip. Often, guests think they’ve already compensated wait staff for their service — and your servers are left empty-handed.

In New Jersey, employers are prohibited from counting these operational charges as tips (even if they are distributed among employees). Pennsylvania goes even further, and now requires that restaurants make it abundantly clear that service fees or operational charges are not tips by putting them as separate line items on receipts. This new law is designed to prevent confusion on the guests’ part that might cause them to short-change servers.

How can Kickfin help you adjust to new rules?

With Kickfin, you can set up guardrails to ensure that you follow federal, state, and local laws when tipping out your staff. If you were already using Kickfin’s holdback function to pass on transaction fees to your servers, adjusting to the new state laws will be as simple as changing the settings in your account. Reach out to your customer success representative with any questions.

Not sending cashless, digital tip outs with Kickfin yet? Request a demo to see how we can help you comply with tipping regulations — and more.

Hotel Trends: 5 Reasons Why Cashless Tipping is the “Next Big Thing”

BY JUSTIN ROBERTS, CO-CEO, KICKFIN

These days, hotels are leveraging technology across almost every aspect of their operations.

But when it comes to gratuity management, many hospitality teams continue to rely on the same-old analog (and arduous) tip payment processes they’ve used in decades past.

In an increasingly digital world, sticking with a status-quo, cash-based tipping program is a missed opportunity to increase tip volumes, delight your guests, and weed out operational inefficiencies. That’s why the most innovative, forward-thinking hospitality brands are digitizing their tipping programs from end-to-end — that is, from tip acceptance to tip payout — for both their hotel staff and their food and beverage employees.

If enabling instant, cashless tip payments isn’t already on your radar for 2023: here are 5 reasons why it should be — plus, what to look for when selecting a digital tipping solution.

Cashless tipping increases take-home pay for employees.

Fewer consumers are carrying cash today than ever before. That’s a major problem for guest-facing hotel employees, whose tips frequently make up a significant portion of their take-home pay. Without an alternative way to accept tips, your bellhops, valet drivers and concierges might find themselves empty-handed even after providing excellent service — simply because consumers no longer have cash in their wallets.

Making it possible for guests to send instant, cashless tips right from their phones ensures that your employees are consistently rewarded for a job well done, whether or not your guests are carrying cash.

What’s more: A robust digital tipping solution will allow you to automatically calculate, pool and distribute tips, giving more of your employees the opportunity to become tip eligible and increase their earning potential.

2. Guests want a better tipping experience.

Employees aren’t the only ones who get frustrated when they miss out on tips. Most hotel guests have, at one point or another, experienced that moment of panic when they’re face-to-face with a more-than-deserving service provider…but they’re not carrying the right bills (or any bills at all).

Giving guests the ability to send instant, cashless tips directly from their phone is just the kind of intentional, elevated touch that takes hotels to the next level.

Ideally, a digital tipping solution will go “beyond a QR code;” while QR codes are a fast and easy way to launch a digital tipping program, guest adoption can be low. Consider seeking out a digital tipping solution that offers automated, on-brand text “prompts;” at a high level, this technology sends a branded, personalized text message to guests after a service is completed — e.g., housekeeping — and gives guests the option to simply click a link and instantly send a tip from their phone.

3. You’ll have a single “source of truth” for hotel and F&B employees.

Tracking and reporting tip payments when you’re managing both hotel and F&B employees is complicated at best. Digital tipping software can give you the power to manage all tip payments, for all types of employees — in one unified platform.

Think of it as your tip payment command center. When you integrate your digital tipping software with your POS, PMS and payroll systems, you get complete visibility into every tip payment — whether it came in through your restaurant POS, or it was a mobile tip sent from your guests to your hotel staff. You can also ensure that every tip is distributed accurately, efficiently, and in compliance with ever-changing tipping regulations.

Plus, you can track every tip payment by individual employee, by shift, by location, or by payroll period, which makes for easy, error-free reporting.

4. Employees are demanding more control over how they’re paid.

In a competitive labor market, hospitality employers are feeling the pressure to constantly increase wages or offer gimmicks — e.g., hiring bonuses — to recruit workers.

But for the modern hospitality workforce, it’s not just how much they’re earning that matters — it’s also how they’re getting paid.

Digital tipping solutions give operators the flexibility to offer multi-channel tip payouts, meaning you can give your employees options as to where and when they will receive their tip earnings.

For example: While many F&B employees might choose to have their tips paid out instantly and directly to their existing bank account, unbanked employees might prefer to receive tips on payroll or even a paycard. A digital tipping solution makes it possible to let your employees choose, without making the process more complicated for you.

5. Going digital can keep you compliant.

Rules and regulations around tipping are complex, to put it lightly. They often vary from one state or even city to the next, and it seems they’re constantly in flux. An increasing number of hospitality employers have been caught in costly legal battles because they (sometimes unknowingly) violated labor and employment laws related to tipping.

Digitizing the tipping process can help you adhere to those laws consistently across your organization, even if your locations span multiple cities or states. Plus, you’ll have an accurate, detailed history of all tip payments, which can prevent tip disputes and trust issues with your team before they escalate into something more problematic.

Cashless tipping: the final frontier

Hotel operators have long understood the operational benefits of digitizing and automating what they can. Until recently, digital tipping wasn’t on the table — but new technology has changed the game. Now, it isn’t a matter of if, but when, hotels will make the switch.

For operators who are exploring solutions, be sure to seek out a software that is:

Truly end-to-end, from tip acceptance to calculation to payout.
Highly scalable across your organization.
Fully integrated with your existing tech stack for automated user management and tax compliance.
Easy to implement.

There’s never been a better time to hit the reset button on your tipping program. The right solution will allow you to create an exceptional tipping experience for your guests and your employees, while delivering measurable results to your business.

To learn more about digital tipping for hotels, contact justin@kickfin.com.

Tip Pooling, Tip Sharing, Tipping Out: How and Why Restaurants Split Tips

In the hospitality industry, tips (or gratuities) aren’t icing on the cake: they’re often the reason employees can make a living wage. The process of splitting tips — i.e., tip pooling, tip sharing or tipping out — helps to ensure that everyone who contributes to a customer’s experience can reap the rewards of a job well done.

To truly benefit your team and business (without damaging your culture) tip pooling or tip sharing must be done fairly, transparently, and in accordance with current regulations.

Whether you’re in California or Connecticut, here’s an overview of how tip pooling (or tip sharing, or tip splitting) should work, plus some resources to make sure you’re in compliance with the laws in your own state.

Before we dive into various tip-out or tip pay-out methods, it’s important to understand some basic terms and stipulations around restaurant tips.

What is a tip?

A tip, or a gratuity, is a sum of money that a restaurant customer pays in addition to their check amount. It’s important to note that a tip or gratuity is not mandated. In the U.S., a tip is often expected, particularly at full-service restaurants — but it’s not required. Generally, a tip or gratuity is somewhere between 10-20% of the total check amount (before taxes and other fees). However, the tip amount is ultimately left to the discretion of the customer.

Who can receive tips?

Tips belong to employees, period. While restaurants can redistribute tips by way of a tip pool (more on that below), managers and employers cannot participate in tip pools. (With that being said, if a manager receives a tip directly from a customer, they are entitled to that money.)

There are some positions that are commonly tipped — like servers, bartenders, bellhops, valets — but the title isn’t what really matters. Your employees qualify as tipped employees if they “customarily and regularly” receive more than $30 in tips per month.

Non-tipped employees are generally back-of-house staff, like chefs, line cooks, dishwashers and janitors. These people contribute to a guest’s experience, but they don’t actually interface with the guests and therefore don’t have the opportunity to receive a tip.

What’s the tip credit?

Employers in the hospitality industry can legally pay their employees less than minimum wage if their employees’ tips make up the difference. When employers do this, it’s called taking a tip credit, because they’re crediting their employees’ tips toward an employer obligation to pay minimum wage. (Keep in mind: not all states allow tip credits. To check out minimum wage rules for your state, go here.)

Tip Pooling for Restaurants

Now let’s take a look at the ins and outs of tip pooling: what it is, how it works, and different tip pooling structures that your restaurant might consider.

What is tip pooling?

Tip pooling is a practice in the hospitality industry where tipped employees contribute the tips they’ve earned into a pool at the end of a shift. That pool is then divided (often equally, but not always) among a designated group of employees. Simply put, all tips received during a shift are pooled and then redistributed among employees.

When restaurants require tip pooling, they’re subject to certain regulations at the federal level, as well as state-level regulations that vary depending on where your restaurant is located. Illegal tip pools have led to multimillion-dollar lawsuits for restaurants, so it’s important to ensure your restaurant is operating within the letter and spirit of the law before instituting a tip pool.

What is tip sharing?

People often use the terms tip pooling and tip sharing interchangeably. And in reality, there’s no real legal definition for tip sharing. From a legal standpoint, we typically see the term “tip pooling” used as a broad, high-level category for the process of contributing any amount of tips to a pool and redistributing them (including what you might consider tip sharing). Learn more about the difference between tip pooling and tip sharing.

However, while tip pooling is often (but not always) based on an equal distribution of pooled tips, tip sharing is based on percentages that vary based on position. For example, servers may keep 60% of their tips and “share” the other 40% with other employees, including FOH staff like bussers and hostesses, and/or BOH staff like dishwashers and line cooks.

What is tipping out?

Tipping out is essentially the same as tip sharing. In the explanation above, the “sharing” part is actually tipping out. So a server would keep their share or percentage of the tip pool, then “tip out” bussers, hostesses, etc. based on pre-set percentages.

What are the current tip pooling laws for 2022?

The laws around tip pooling or tip sharing (and tip payments in general) are somewhat complex. Here’s a quick rundown of tip pooling laws and regulations.

Who can participate in a tip pool? Managers, supervisors and employers absolutely cannot participate in a tip pool, period. (If you have managers or supervisors that sometimes perform duties of a tipped employee, you can learn more about that here.)
In 2018, the Department of Labor issued a rule change that now allows BOH employees to participate in a tip pool, but only in states where there isn’t a tip credit — so, primarily the West Coast.
Federal vs state tip pooling laws.: There are both federal and state regulations around tip pools. It’s critical to understand both the federal laws and the state laws that apply to your business. Keep in mind: if you operate multiple sites, each site is governed by the regulations where it is located. (In other words, it doesn’t matter where you’re headquartered.)
Tip pooling lawsuits. There have been multimillion dollar lawsuits due to illegal tip pools. Generally, tip pool lawsuits are the result of a) Management or management employees taking part in the tip pool, or b) Employees being unclear about the rules of the tip pool (lack of transparency and communication).
Changes to tipping regulations. Laws continue to evolve as they relate to minimum wage for hospitality workers, the tip credit, and more. Many of these changes are tied to administration changes. (For example: the 80/20 rule has shifted under Obama, Trump, and now Biden.) Changes to these laws can impact your tip pooling policies, so it’s important to stay up-to-date.

Restaurant tip pool policies and formulas

In order to create a tip pool for your restaurant, you’ll need to answer these two questions.

How is the tip pool being created or calculated? In other words, what’s going into the pool? A few common options:

Require all tips to go into the tip pool, then redistribute.
Require a percentage of a server’s total sales to go into the pool. (E.g., a server’s sales for their shift total $500; the server might put 2% of his sales, or $10, into the pool.)
Servers keep a set percentage of their tips, then contribute the remainder to a pool.

Who is participating in the tip pool? We’ll say it again for the people in the back: Managers, supervisors and employers cannot participate in a tip pool. But you’ll need to decide which employees you want to benefit from the tip pool. That could be:

Only servers
Servers and bartenders
FOH staff
FOH and BOH staff

Sample tip sharing policies and methods

Below are a few sample tip pooling policies. Of course, before instituting a tip pool policy, you’ll need to make sure it’s in accordance with both federal regulations and the state regulations that govern your restaurant locations.

Basic tip pool. All tips are pooled, then evenly distributed among participating employees. This happens more frequently with QSR and fast casual restaurants — i.e., the type of establishment that might have a tip jar.
Set percentages. Generally, for percent-based tip-outs, servers keep a majority percentage of their tips, then contribute the remainder to a pool. An employee’s role or position then determines the amount they receive from the pool.

Real world example: Servers keep 70% of their tips and contribute 30% to a pool. Bartenders might get 50% of the pool, hostesses get 20%, bussers get 10%, dishwashers get 10%, and so on.

Points system. Employees are assigned points based on their role, and those points determine the percentage of the tip pool they receive.

Real world example: Let’s say servers get 15 points, hostesses get 5 points, and bussers get 2 points. You’d want to determine the total points for each shift.

4 servers = 60 points
2 hostesses = 10 points
1 busser = 2 points

So, total points = 72.

If total tips earned in one shift is $792, the value of a point is (792 / 72), or $11. So each server would get $165 (15 x $11), each hostess would get $55, and each busser would get $22.

Hours worked. Tip pool amount is divided by total hours worked. That number is then multiplied by the hours each employee worked to determine what they’re owed.

Real world example: 4 servers worked a total of 25 hours. The tip pool totals $450. For every hour worked, servers earn $18.

Server A worked 4 hours, gets $72
Server B worked 7 hours, gets $126
Server C worked 8 hours, gets $144
Server D worked 6 hours, gets $108

Learn more about calculating shared and pooled tips here.

A few other notes on tip policies

Employer tip “deductions”

As stated above: tips belong to employees, not employers. However, when your employees are tipped via credit card, federal law generally allows restaurants to deduct a proportionate percentage of the credit card processing fee from the tip. (That is, if you have to pay a 4% credit card processing fee, you can legally deduct 4% from your employees’ tips. Keep in mind: this is another case where federal law may permit this policy, but states may have stricter rules.)

Service chargers, surcharges and auto-gratuities

Service charges and surcharges aren’t gratuities. If any of those charges go toward employees, they must be treated as wages, not tips. That goes for auto-gratuities, as it’s a mandated charge and not at the discretion of the customer. For more information on these charges, check out our post with labor and employment attorney Beth Schroeder.

What is the best tip-out policy for your restaurant?

Tip pooling can be a sensitive subject. Many restaurateurs have the best of intentions when they decide to establish a tip pool, but it’s not always done in a way that benefits the team.

While everyone plays a role in a guest’s experience, servers typically put in the face time and (arguably) can make or break the tip by managing the experience — i.e., establishing rapport, avoiding mistakes, doing damage control when the kitchen’s backed up or runs out of salmon. Servers and other tipped employees may be less excited about sharing tips with back-of-house staff.

And, unfortunately, there’s a level of distrust that your employees may have around tip pools, as some restaurateurs and employees have gamed or abused the system for their own benefit. While they’re certainly in the minority, they’ve given tip pooling a bad rap.

On the other hand, there are some pros to tip pooling and tip sharing with non-tipped employees. It keeps anyone from having a truly terrible night in terms of tips earned. Also: Your back-of-house staff certainly contributes to the experience a guest has — and they’re working just as hard as their tipped co-workers — but they don’t have the earning potential that comes with being a tipped employee.

If you’re establishing a tip pool for the first time, after ensuring that you’re 100% compliant with state and federal laws, think through the policies and specific percentages that will work best for your restaurant.

Then, focus on transparency: clearly communicate your objectives and policies. Not only is it required by law that you provide oral or written notice, but it’s also important from a culture and trust perspective. If employees understand the thought and logic behind your decisions, they’ll feel confident that you care about the financial well-being of every person on your team.

What’s the Difference Between Tip Pooling and Tip Sharing?

Do you want to foster teamwork in your restaurant? Want everyone to feel invested in providing top-notch customer service? Look no further — we’ve got the low-down on tip pooling versus tip sharing.

While guests may only interact with one server, we know there are a lot of people working behind the scenes to create an excellent guest experience. By pooling or sharing tips, you can reward eligible staff for their hard work without increasing labor costs.

People tend to use “tip pooling” and “tip sharing” interchangeably, but there are some major differences that you’ll need to know before implementing any tip-splitting system. Let’s go over the two systems to see which works best for your business model:

Tip pooling

In a tip pool, servers contribute anywhere from 20-100% of their tipped earnings, and managers redistribute tips between all eligible staff. While you may be accustomed to servers working independently to earn their tips, tip pooling creates a less competitive and more collaborative work environment.

Each employee’s payout depends on all guests receiving great service, not just those in their section. Whether you choose to evenly distribute the tips or do a weighted system, tip pooling provides an opportunity for teamwork and increased productivity.

Pooled tips also alleviate section and table disputes between servers. Your veteran servers may feel slighted if they don’t get the “best” section, but new servers want the opportunity to show off their skills. And, of course, mistakes happen, and servers may accidentally take a table in the wrong section. With pooled tips, this situation becomes no big deal. Everyone is equally rewarded for their work — and you won’t have to mediate any disagreements.

There is, of course, a downside. You have much less insight into how your servers are individually performing, and your top-earning servers may feel like they’re losing out under a tip pooling system.

Tip sharing (or tipping out)

Most servers are familiar with “tipping out,” or sharing a percentage of their tips with bartenders, hosts, and other support staff. Generally, servers tip out based on a percentage of their sales as a way to thank their team members for contributing to the guests’ experience. For example, the bartender may earn 5% of alcohol sales, while hosts and bussers earn 5% of food sales.

Allowing servers to keep the majority of their tips incentivizes them to offer their best customer service to their sections. Hosts, bartenders, and other support staff also feel invested in creating positive guest experiences because their extra tip-out depends on it. However, you may see more competition between servers for better sections and shifts.

So, what’s the difference between tip pooling and tip sharing?

Legally speaking, nothing. No matter which system you use, you still need to comply with federal and state laws surrounding tip pooling — or else you may be hit with a hefty fine.

Here are some of the rules you need to follow for both tip pooling and tip sharing:

Employers, managers, and supervisors cannot keep any tips under any circumstance
If an employer is paying the full minimum wage (not taking the tip credit), non-tipped employees like cooks and dishwashers may participate in the tip pool
Pooled tips must be redistributed within the pay period
If you pool tips, you need to maintain detailed records of tips reported, tips distributed, and payroll records

Make sure you also look up your state’s tip pooling laws to avoid getting into hot water. According to the Civil Money Penalty final rule, you’re liable for fines and other punitive actions, even if you unknowingly violate tip regulations.

How to choose a tipping system

The main difference between tip pooling and tip sharing is your restaurant’s employee culture. If you’re running a counter service cafe where employees take turns running the register and serving up food, pooling tips and dividing them evenly might be your best bet. With servers taking care of their individual sections, they most likely expect to take home the majority of their tipped earnings.

The best way to choose: talk to your employees. Tips account for the majority of their income — so they’ll naturally want to weigh in. If they’re not happy with the tip sharing system, you run the risk of losing your best people.

Whether you pool or share tips, your employees want to be paid sooner rather than later. With Kickfin, you can instantly send tips straight to employees’ bank accounts. Request a demo today.

How to Calculate and Split Tips for Employees

Calculating tip pools can be hard. But calculating tip pools at 2 a.m. in the back office after pulling a 10-hour shift? Let’s just say that’s not anyone’s idea of a good time.

Restaurant managers have a lot on their plates, and for teams that still tip out in cash, you can add bank teller-slash-mathematician to their job description, too.

Tip pooling can be a great way to ensure everyone on your team gets rewarded for a job well done. But if it’s not done accurately, fairly, and legally, the consequences can be anything from accounting headaches to unhappy employees to serious lawsuits.

To ensure you get all of the benefits of tip pooling and without the risk: here are a few best practices and formulas that you can put to work.

Setting a tip sharing policy

Tip pooling and tip sharing are two ways restaurant owners can increase employee wages without increasing labor costs, and it can help foster a sense of teamwork among employees. It does, however, mean that your managers will need to do a bit of math before distributing tips at the end of a shift.

First things first, you need to choose a tip pooling or tip sharing system and stick with it. Here are some easy ways to split tips between employees — and how to calculate tips for each of them.

Tip Pooling

If you want to collect all tips and redistribute them evenly, tip pooling is for you. This is a way to ensure that all servers, bussers, cooks, hosts, and dishwashers benefit from the tipping system. Everyone has a stake in the game to provide excellent service to guests. However, tip pooling is heavily regulated — so make sure you check out your state’s tip pooling laws before implementing this system.

To calculate each employee’s tips after a shift, you generally just need to divide the total tips by the number of eligible employees:

3 servers, a bartender, and a host are all eligible for tips
Total tips = $1000
$1000 tips / 5 employees = $200 each

In restaurants, shifts can often be unpredictable. One server may get cut way earlier than the other, so splitting evenly doesn’t always feel fair — and employees may not be willing to work under this system. To make things more equitable, some restaurants choose to split pooled tips a different way. If you’d like to follow the “hours worked” system, you can divide the tips by the total number of hours worked and tip each employee based on their hours worked. For example:

2 servers and 1 bartender are eligible for tips
Server #1 and the bartender worked 8 hours each
Server #2 worked 4 hours
Total tips = $500
Total hours worked = 20
Each hour worked = $25 in tips

Now we’ll multiply each employee’s hours by 25 to find out how much they earned this shift:

Server 1 = $200
Server 2 = $100
Bartender = $200

This system requires a little more thought (and in real life, the numbers won’t be quite as clean), but your servers and bartenders may find this more agreeable than an even split.

2. Tipping out

Most servers are familiar with “tipping out,” a system where they share a percentage of their tips with bartenders, hosts, and other support staff. In this scenario, the server keeps the majority of the tips they’ve personally earned, but other staff members are still rewarded for their contribution.

Usually tip out percentages are based on sales. You’ll need to set your own tip out policies, but here’s an example of how to calculate tip outs:

Your servers tip out 5% of alcohol sales to bartenders and 2% of food sales to the host
A server sold $500 in alcohol and $1000 in food
The server received $300 in tips
Bar tip out = $25
Host tip out = $20
The server would leave with $255 in their pocket

3. The Point System

While very similar to the “tip out” system we just described, the point system is another valid way to share tips among employees. You assign a point value to each role in the restaurant, and use those values to distribute tips. Here’s an example of how it works when there are 2 servers, a host, and a bartender working together:

2 servers = 35 points each
Host = 10 points
Bartender = 20 points
Total tips = $1000
Total points = 100
$1000 in tips / 100 points = $10 per point

Now, you multiple each worker’s points by 10 to see their tips earned for the night:

Server tips = $350 each
Bartender tips = $200
Host tips = $100

Go Cashless

No matter which system works best for you, we also recommend ditching cash tips. After doing all the tip calculations for the night, the last thing your managers want to do is sit and count cash.

Go digital with Kickfin instead. Our tip distribution platform allows you to quickly input employee tips and send money straight to your employees’ bank accounts. Your managers will save time, your employees will be happier, and you’ll save on labor costs. Request a demo to see Kickfin in action today.

[Free Download] The Restaurant Exec’s Guide to Digital Tipping in 2023

Tipping out in cash is one of the most analog processes in the restaurant industry. And it’s more than a headache: It’s probably impacting your bottom line.

From time-consuming bank runs to tedious cash counting to the ever-present risk of theft and human error: cash tip-outs are, quite simply, a liability for your people and your bottom line.

And yet: 90% of restaurants continue to pay tips in cash.

We get it.

Change is hard, and sometimes the status quo is the path of least resistance. But there’s never been a better time to hit the reset button on tip-outs.

Going into 2023, digital tipping will be one of the largest transformations to the hospitality and service industries.

If you’re not sure where to start: we’ve got you covered.

Get the Restaurant Exec’s Guide to Digital Tipping [2023 Edition]

Check out our free Digital Tipping Guide to learn about the overnight, measurable ROI you can expect when you make the switch. Inside the guide, you’ll get more details about the hidden costs of cash tip-outs as we move to an increasingly cashless society.

You’ll also learn about the less-obvious benefits of cashless tipping, including:

Reduced employee turnover
Robust tip payment tracking and reporting
Org-wide compliance with complicated tipping regulations
And more!

Plus: when you download the guide, you’ll get a rundown on the Top 5 “Must-Haves” when selecting a digital tipping solution. Choosing the right vendor is key to the success of any digital tipping program — and it all starts with understanding your own needs and understanding all of the options on the table.

Want the Cliff Notes version?

We’ll break it down for you. A digital tipping platform allows you to tip out your servers, bartenders, and other hospitality staff without the hassle of payroll tips, bank runs or bill-counting.

To get all of the benefits of digital tipping, it’s critical that you select a software that gives your employees the options — including (and especially) the option to have their tips sent instantly and directly to their existing bank account.

Whether they opt for instant digital deposits or payroll tips, employees appreciate having more control over when and how they get paid. On top of happy employees, your flexible payment options make for a great hiring tool to attract excellent workers, even amidst a labor shortage.

If you want to skip the guide and see digital tipping in action: schedule a demo today and we’ll give you a free, personalized walkthrough of Kickfin!

How to Reduce Restaurant Employee Turnover

If you’re in the restaurant business, you’re in the people business.

We’d argue that your restaurant employees are your greatest asset — because at the end of the day, a restaurant isn’t its wine list or its rooftop bar or its James Beard Award-winning cuisine. A restaurant is its people: without them, everything falls apart.

Unfortunately, attracting and retaining the right employees in your restaurant is a perpetual battle, and it’s not getting any easier. In 2018, the employee turnover rate in the hospitality industry increased to 74.9 percent — the highest it’s been since the recession.

If we’re looking at the big picture, a rising turnover rate in hospitality isn’t a bad thing: it’s actually a byproduct of a healthy economy because it indicates that workers feel confident in the labor market. In other words, they’re not scared to quit their jobs and look for better alternatives.

Of course, that presents a unique challenge for restaurant employers in an already highly competitive labor market.

If you’re losing solid employees to other restaurants, or if you’re unsure how to compete with the explosion of gig-economy businesses: get our top four tips for retaining your restaurant employees.

1. Prioritize training

This seems like a no-brainer, but you’d be surprised at how many restaurant employees are dropped into the deep-end and expected to perform flawlessly. Even if your new hires have recent, relevant experience, no two restaurants are the same, and their background may not directly translate to a new place with new people, processes, standards and expectations.

That’s why a formal, repeatable training program is critical, no matter how big or small your restaurant is. Your program doesn’t have to be complex, but the most effective ones include a variety of tactics — written instructions, personal demonstrations, shadowing — to cover all types of learners.

Prioritizing employee training will ensure a consistent level of knowledge and service among each of your workers, which of course, is great for business. More importantly, a solid training program will build confidence. When people know exactly what they’re supposed to do and how they’re supposed to it, they’ll have a clear path to success and the tools they need to get there. That’s empowering.

Confident, successful, empowered employees tend to be happy employees — and happy employees tend to stick around.

2. Be fair — always.

There are a host of rules and regulations in place to protect restaurant employees, and for good reason: they’re some of the hardest-working people out there, and many of them are living paycheck-to-paycheck.

But it’s hard for employees to stay up-to-date and fully informed as to what’s fair or legal, and really, it’s not their job. As their employer, it’s your duty and obligation to play by the rules. And if your people see that you’re going out of your way to do right by them, they’ll take note — because that quality can be hard to find in an employer.

So what does that look like, exactly? It’s “little” things — like being aware of the fact that even when your employees are in training, they’re on the clock. Or knowing that if your servers spend a certain amount of time doing side work — bussing tables, folding napkins — where they’re not able to receive tips, they need to get paid the full minimum wage.

It’s also about finding ways to foster trust and transparency. In an increasingly digital industry, it’s much easier to give employees a great deal of visibility into their work — from scheduling and table management to payroll and tip-out history, so make sure you’re taking advantage of the right tools.

Speaking of money: maybe your people love what they do, or maybe hospitality isn’t their ultimate calling — but either way, at the end of the day, your employees are there to make a living and get paid. By ensuring they’ve got immediate access to the tips they’ve earned at the end of every shift, they’ll be less likely to leave you for the gig-economy jobs that pay out in real time.

Long story short: when you demonstrate fairness to your employees, they likely won’t take it for granted.

3. Recognize your people.

Motivation, culture and morale are all driven by recognition of a job well down. Recognizing your employees doesn’t have to be hard or expensive — it could be a shout-out during a team meeting, an early-clock out, a free meal from the kitchen or a small gift card.

This practice reinforces the right behaviors from your team members who are hustling and positions them as role models for the workers who need to step up their game. It’s also a way to show that you’re paying attention (without micromanaging), which makes everyone feel known and appreciated.

4. Nurture relationships.

This is a critical advantage restaurants will always have over the impersonal gig economy jobs: it’s simply impossible for the Lyfts and UberEats of the world to replicate the human connections and authentic relationships you have the opportunity to cultivate with your employees.

We live in a fast-paced world, and that’s amplified in the hospitality industry. But taking the time to get to know your employees, as you can, on a more personal level will go a long way in helping employees feel invested in their work and committed to their team.

When you develop those relationships, you’ll also develop trust. That can go a long way in reducing employee turnover because they’ll be much more likely to come to you when things aren’t going well or when their needs aren’t being met — before they go out and find a new job.

Learn how Kickfin’s tip-out solution can improve culture and retention rates in your restaurant or bar. Get a free demo today.

8 Restaurant Software Solutions You Need for 2020

For restaurant operators — and the consultants who advise them — building out your technology stack can be overwhelming. There are literally hundreds of software products and platforms at our disposal that promise immediate ROI, new operational efficiencies, increased productivity…the list goes on.

Of course, no restaurant needs more than a handful of tech tools, no matter how big you are. So how are you supposed to know which ones are right for your business?

We recommend taking a step back and thinking about the solutions you require — before you start sifting through actual vendors and platforms.

Below, we’ve compiled a list of solutions we’d recommend for every multi-location restaurant group. It may look like a lot — but the good news is that with only a few different tools, you can cover every item on this list!

1. POS Software

At the most basic level, your POS hardware and software should give you the tools you need to manage orders and process payments. A modern POS system should also have data security features to protect customers’ information (and yours), and it should also provide some level of reporting.

With that being said, there’s now a good amount of crossover between POS solutions and end-to-end restaurant management software. The latter includes POS hardware and software, as well as some combination of inventory management, employee management, accounting, payroll, and more — but not everyone needs such a robust solution.

Let your budget be your guide, and also consider the tools you’re currently using so you don’t double up on functionality.

2. Accounting Solutions

Many restaurateurs outsource accounting to third-party firms or consultants, and that can be a great solution. But if you’re handling everything in-house, you need a transparent, accurate, and easy way to track your numbers — including sales, revenue, food costs, vendor payments, payroll, and more.

You’ll want an accounting system that integrates seamlessly with your POS solution, as well as any other software solutions you have in place. You also should be getting automated, actionable and real-time insights into where your business stands financially. Bonus points if it automatically tracks payments and generates 1099s for your vendors.

3. Payroll and Tip Out Solutions

For many restaurant owners, operators and managers, payroll swallows up hours of their week, every week. Choosing the right payment solutions will not only give you time back; it will also make a strong statement to your employees — that you care about them getting paid fairly, quickly and predictably.

Many employees in the restaurant industry live paycheck to paycheck, which means the faster they can access the wages they’ve earned, the better. If weekly payroll is cost- or time-prohibitive for you, then leveraging a real-time tip-out solution for your employees can fill in those gaps between paychecks.

Keep in mind: With both payroll and tip-out software solutions, there may be hidden fees (for you and for your employees) that you’re not accounting for in your monthly or annual vendor payments. Make sure you fully vet the solution you’re considering before you sign on the dotted line.

4. Workforce Management Solutions

Hospitality employees often struggle with difficult or unfair schedules, lack of training, and poor communication. Leveraging workforce management software solutions can boost your team’s culture and drive retention, loyalty and engagement. Plus, it can reduce labor costs from 4 to 5%.

If you’re purchasing workforce management software for a multi-location restaurant group, it should offer (most of) the following capabilities:

Auto-scheduling
Time tracking
Workforce communication
Insights and analytics
Hiring, training and other HR functionalities

5. Table/Floor Management

Table management solutions deliver visibility into what’s happening at each table in real-time, so your team can know exactly when and where to seat guests, serve guests, bus tables, etc.

Table management solutions also give restaurant operators actionable data and insights around what’s happening on the floor. And by reducing wait times and making service more efficient, they often result in a more pleasant experience for guests.

These tools run the gamut from super simple to incredibly smart. But don’t pay for more than you’ll need in the foreseeable future, and consider all the implications of going digital: for example, if your demographic skews more Baby Boomer and less millennial or Gen Z, some of those (very cool) features may not be necessary.

6. Inventory Management and Purchasing

When you automate inventory management and purchasing, you’ll cut down on food waste and costs, keep inventory records current, understand how food costs stack up against revenue, and make bookkeeping a breeze.

Pro tip: Be sure your purchasing and accounting solutions to play well together, if they’re not part of the same platform, so you can avoid the dreaded export/download/import process.

7. Online Ordering and Delivery

Smart restaurateurs know that online ordering capabilities can quickly and easily increase sales, especially during slower seasons.

Choosing the right online ordering platform can also save you time, labor costs and hassle. It’s faster than phone orders (and requires less manpower), and orders go straight to the kitchen, so there’s a lower risk of human error.

Plus, once your online ordering program gets off the ground, you’ll have a wealth of customer information that you can leverage to market to them, so they’ll keep coming back to you.

Remember: if online ordering isn’t part of the POS solution you’ve purchased (or you’re about to purchase), you’ll want to be sure they sync. The same goes for menu management, so you can avoid having to update menus in multiple locations every time a menu item or price changes.

8. Customer Loyalty Solutions

A loyalty program is a highly effective marketing tactic for restaurants, and (bonus!) it can be relatively hands-off, once it’s up and running, assuming you’ve got the right software in place.

There are so many ways to structure loyalty programs: points systems, tiered programs, etc. Maybe you want to build a VIP program, or perhaps you want to reward guests for making referrals or writing reviews. If you’ve got a vision for the way you want yours to work, there’s likely a software solution that can make it happen.

restaurant software restaurant technology

Managing Millennial Restaurant Employees

Real talk: millennials have gotten a bad rap over the years. At best, they’ve been a puzzle everyone wants to solve; at worst, their name has become a catch-all for anyone under the age of 23 who comes across as entitled unmotivated, or lacking ambition.

But millennials aren’t kids anymore. In fact, a lot of them are out of school and have families of their own; some of them (ahem) are even staring down middle age. And they now make up the bulk of the hospitality workforce as employees and managers — and increasingly as owners, executives and consultants.

If you’re operating a restaurant or bar, chances are, you’ve probably got a team of millennials. Even if you’re a millennial yourself, you might be scratching your head as to how to manage them in a way that engages them, motivates them to work hard, and makes them want to stick around.

Good news: a little understanding can go a long way. Here are 5 things you should know about your millennial restaurant employees that will make work more productive and pleasant for everyone (yes, yourself included).

1. Set them free (within reason).

Maybe you’ve heard millennials have a problem with authority — and for some of them, that’s probably true. But it’s no more of an epidemic for millennials than it was for their predecessors.

What is different, however, is their very obvious desire for freedom. Millennials, on the whole, are wary of being tied down. Compared to Baby Boomers and Gen Xers, they’re enthralled with the idea of a life in constant motion. FOMO (fear of missing out) is a real thing, both on a random Friday night, but also when it comes to the bigger picture— because millennials want to see and do and experience everything.

As restaurant employees, it doesn’t mean they’re unreliable or impossible to pin down. But it does mean they’re more open to moving from one job to the next, unlike their parents and grandparents who tended to stick with an employer for the long haul.

So how do you keep them around and give them the freedom they crave?

Train and teach: There’s nothing less freeing than feeling like you’re being micromanaged. As a restaurant owner, you won’t have to do that if you create an effective and efficient onboarding program that clearly communicates responsibilities, policies and procedures from the get-go. And remember: training isn’t a one-and-done kind of deal. It should be ongoing, so that you’re always reinforcing good habits.
…and then, trust: A Harvard Business Review article defines workplace freedom as “trusting employees to think and act independently.” That doesn’t mean your restaurant becomes a free-for-all; it means if you’ve hired the right people, implemented the right framework, and communicated it to your team, then everyone should feel equipped and empowered to succeed in their roles — no hovering required.
Let them share: Hopefully, you’re hiring smart, curious people who have been shaped by many diverse experiences. Give them the freedom and space to share ideas, give feedback, or contribute in ways beyond the role they were hired to do, if they express an interest or desire. At the very least, they’ll appreciate your willingness to listen and your trust in their perspective.

2. Be flexible

Freedom and flexibility go hand in hand. Many hospitality workers have chosen this line of work because it offers some level of flexibility that other jobs don’t — it’s not a 9-to-5, stuck-in-a-cube kind of gig. And while this is a true career for some people on your team, for others, it’s a job they’re able to work around school, or family duties, or another job.

But restaurant employees — from hostesses to servers to line cooks to chefs — are some of the most overworked people in the modern workforce. And the keyword there is people: they’re not assets or line items. They’ve got lives beyond the four walls of your business.

Fairness and compassion go without saying. Being accommodating is simply the right thing to do when circumstances arise that are beyond their control. But if you get a little creative, there are other ways to provide a little flexibility to your millennial employees:

Millennials increasingly gravitate toward remote-friendly, work-from-home jobs. Obviously, unless they’re planning to seat people in their very own kitchen, it’s hard to work remotely when you’re a restaurant employee. But perhaps you can choose to make some of your team meetings virtual, or maybe you can give digital access to onboarding and training materials.
Another flexibility play is giving employees more control over schedule creation, while also ensuring that your team is actually large enough for the business you’re doing, so that it’s not impossible to get shifts covered as those needs arise.

3. Go digital.

Technology is a millennial’s one true love. There’s a “smart” everything these days, and no one is more enamored with (or appreciative of) the digital age than this crowd.

Millennials are well-versed in technology and they understand the efficiencies and capabilities that innovation can deliver at home and on the job. They’re also extremely well informed because they’re always connected to the rest of the world — so they know what else is out there.

That means, for employers, ignorance is not bliss. If you’re not leveraging the technologies that could make work and life easier for your people, then they’re probably well aware of that fact, and they have easy access to jobs with other employers who are doing it right.

For example: many restaurateurs have felt the pain of the labor crisis as their employees go after “gig economy” jobs with the Ubers and Lyfts of the world, whose platforms allow for real-time pay out. Taking advantage of industry innovation can help you win the battle for good labor.

Tools like Kickfin — which allow you to tip out employees in real time, directly to their bank accounts — or front-of-house solutions like workforce and table management software will certainly deliver ROI to you, but they’ll also show your team that you’re invested in their wellbeing and that you take care of your people.

Pro tip: Employee-facing software solutions should drive transparency and engagement across your whole team, not just your managers or operators. Selecting vendors that take the employee experience into account is incredibly important; it may be something as simple as having a well-designed app or an intuitive, easy-to-learn interface.

4. Give them purpose.

Work is work — there’s no way around it. But millennials are coming to the table (so to speak) with higher expectations. Yes, they’re willing to work, but they also want to be fulfilled and find meaning in what they’re doing.

It’s not about pride or being the most important person in the room; it’s about being a part of something bigger than themselves and contributing to a greater cause. Maybe your restaurant isn’t going to save the world or solve the hunger crisis, but every good business and brand should give its people and its customers a reason to believe.

So find out what that reason is, if you haven’t already. Know your mission, know your why — and share it with your team. Every single person you employ should be able to articulate this.

At the end of the day, there’s no code to crack or equation to solve. Like with any other employee or colleague, empathy will go a long way in establishing trust and transparency — two things that millennials value highly.

And here’s the good news: when you bring millennials into the fold, they tend to bring a lot of people with them. By winning their respect and loyalty, you’ll also win some of the best brand ambassadors you could ever hope to have.

Kickfin can change the way you manage your millennial restaurant employees.

millennials restaurant employees

4 Reasons Why Prepaid Cards Are Bad for Restaurant Employees

If you’re one of the many restaurant owners or operators who uses prepaid cards to tip out your employees: we get it.

On the surface, prepaid cards, or pay cards, seem like a smart solution to the daily (and nightly) tip-out dilemma. Managers don’t have to acquire and distribute cash, which saves time and hassle. Plus, you’re keeping your employees safe — because no one is more vulnerable to theft than when they’re walking to their car with a pocket full of cash in the wee hours of the morning. And the biggest perk of all: you’re giving your employees instant access to the money they worked so hard to earn.

Except: you’re not.

Unfortunately, prepaid cards aren’t as simple or seamless for your employees as they may be you. What seems like a superior alternative to cash tip-outs could actually be costing your people a sizeable chunk of their earnings — and creating other unintended consequences — every time you load up and hand out a card.

Here are four reasons why prepaid cards could be making life harder for your staff.

1. Hidden fees

It’s not an exaggeration to say that prepaid cards are predatory. Prepaid cards come with a slew of fees that will add up incredibly fast when your people try to use their cards. Want to make a purchase? Check your balance? Withdraw cash? It’s not uncommon for people to be hit with fees for all of the above.

Depending on the card or vendor you choose, hidden fees can include:

Transaction fees: Transaction fees for prepaid cards may include a monthly fee or per-purchase fee; ATM withdrawal fees; and cash reload fees.
Service fees: Service fees for prepaid cards may include checking your card balance at an ATM; fees charged when you call customer services; and inactivity fees.
Other fees: Again, depending on the card or vendor, your employees could run into miscellaneous fees listed within the “fine print.”

Suffice it to say, when restaurant employees attempt to use prepaid cards, they’re likely losing valuable dollars they’ve earned. And while that’s frustrating for everyone involved, it could lead to an even bigger problem for your restaurant — because your people could start looking for a new employer in our competitive gig economy, where they’ll get immediate access to their earnings without having to pay for it.

2. Long transfer times

The hospitality workforce has been overtaken by millennials, and their Gen Z successors aren’t too far behind. This 35-and-under crowd has a deep affinity for all things automation. That’s especially true for monotonous, unpleasant tasks…like paying bills.

You’d be hard-pressed to find a millennial who doesn’t have at least one of their utilities or subscriptions (power, phone, gas, cable, Netflix…) set to auto-pay, so that payment is pulled directly from their bank accounts on a monthly basis.

That can be a problem if you’re living paycheck-to-paycheck and you’re not getting access to your tips after your shifts. Unfortunately, “instant” pay cards aren’t a solution. Not only can it take 2-4 full business days to transfer and receive funds from your card to your bank account — but your employees will often run into fees for attempting to do so. It’s yet another inconvenience for your people (and another way pay cards make their money).

3. Low vendor acceptance

Prepaid cards are different than debit or credit cards. Again, it depends on the card you’re using — but it’s not unusual for prepaid cards to get turned down by specific types of vendors. In other words: prepaid cards may not be accepted everywhere your employees wish to spend their money.

It seems people run into the most issues with travel-related vendors — like car rental services. According to Chime, vendors that typically put holds on cards may be less inclined to accept a prepaid card, as they don’t come with a name or expiration date.

4. Fewer regulations

It’s no secret that checking accounts and credit cards are highly regulated to protect consumers from fraud and loss. Until this year, prepaid cards weren’t afforded the same protections.

Fortunately, in April 2019, a new Consumer Financial Protection Bureau rule extended some of the existing checking account and credit card regulations to prepaid accounts — but there are several caveats.

For example, in order to be covered by several of the new protections, users must register their cards. If your restaurant employees neglect to register their card (typically through an online form), then they won’t have the right to dispute fraudulent charges or get reimbursed following loss or theft.

Another catch: in the event of unauthorized charges, prepaid card users are required to pay the first $50, and if they don’t report the unauthorized charges within two days of the activity, that number can go up.

Without question, restaurants that use prepaid cards as a tip-out solution have only the best intentions — and they may be saving their managers the time and hassle of dealing with cash. But the hidden issues that come with prepaid cards make them less than ideal for your employees — and ultimately, it could cost you your best people.

Here’s the good news: with Kickfin, you can deliver your employees’ tips directly to their bank accounts in real time — with complete transparency, and no hidden fees. Get a demo today!

pay cards prepaid cards