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.

People live paycheck-to-paycheck

Not just some people are living paycheck to paycheck. Most people are.

That’s right: around 64% of U.S. consumers are just getting by. Even more shocking, 51% of consumers who earn over six figures are still living paycheck to paycheck, despite their higher tax bracket.

It’s a major reason why employees need access to their earnings sooner rather than later. The pressure of watching your bank account slowly drain in the two weeks between payday is putting a lot of pressure on people, leading to a much greater demand for instant payments than ever before.

Instant payouts are now table stakes

A PYMNTS study found that people of all ages prefer to be paid out immediately, as well as some other interesting statistics:

When given the choice, 68% of respondents said they would opt for an instant pay out
40% of gig workers surveyed were willing to pay a fee for an instant disbursement
81% of respondents were willing to switch jobs to an employer that offers instant access to earned wages and tips

It’s safe to say instant payouts are becoming the expectation for today’s modern workforce. But not all instant payouts are created equal.

Consumers are much more likely to engage with an instant payout system if they aren’t required to share their bank account and routing numbers and can access funds with just their debit card credentials. Why? It’s faster, more convenient, and feels more secure.

Instant payouts and tip management: a perfect use case.

Instant payout innovation has come at the perfect time for the restaurant industry, which is struggling more than ever with the hassles and cost of cash.

If you’re in the restaurant biz, then you know: Most consumers pay with credit cards these days, not cash. That means there’s rarely enough cash on hand to pay out tips at the end of a shift. But employees still want and need instant access to their tip earnings.

Enter: instant payouts. Offering employees the option to receive their tip earnings directly to their bank of choice, the second their shift ends, can go a long way in improving employee satisfaction and ensuring their financial security.

But instant payouts are more than a work perk for employees. The operational benefits for employers range from reduced administrative burden and significant time savings to stronger compliance and streamlined reporting.

Modernizing your tip management strategy: 5 best practices

There are three key components to your tip management strategy:

Tip pool policy: How are you divvying up tips among your staff?
The payout method: How are you distributing those payments?
The systems and tech: What are you using to facilitate those payments?

Under the current circumstances, restaurant operators are under immense pressure to bring their tip management into the future.

5 best practices for tip management

Based on our experience working with restaurant operators across the country, we’ve found that these five practices are the perfect recipe for building a successful tip management system.

Determine the right model and method for your restaurant, based on your location and tech stack
Get a written tip policy (and get it legally approved)
Solicit employee feedback in a structured way
Leverage technology for efficiency, accuracy, and compliance
Don’t over-complicate (but do over-communicate!)

Tip management solution must-haves

When seeking a new tip management solution, make sure you carefully vet each system to see if it really meets your needs, or if it’ll be just as frustrating as cash. Here are a few suggestions for what should be on your checklist:

Instant payouts
Direct to bank of choice
Availability of employee funds
Payroll option
Integrations
Simple implementation + onboarding process
Around-the-clock customer service

Big emphasis on strong customer support teams. Restaurants and bars don’t have “typical” business hours, so neither should your tech support.

Bar Louie automates payouts with Kickfin

In a recent case study, we took a deep dive into our partnership with Bar Louie, a chain with over 60 locations that took advantage of our new integration with Toast. They made the switch from cash payouts to Kickfin’s instant, direct-to-bank payouts and haven’t looked back.

Two-minute tip-outs

Before Kickfin, managers spent an average of 45 minutes per shift working through Bar Louie’s complex tip out policy and counting cash. The tip pooling rules were important to them — it’s what makes the entire staff feel like they’re getting their fair share.

Using the Kickfin Toast integration, Bar Louie was able to automate the tip pool calculation process and send tips straight to employees in under two minutes – a potential annual savings of 15,000 labor hours across all locations.

>> See more customer success stories

Do you want to see these kinds of cost-saving results at your business? Let’s talk. Get a demo of Kickfin and see why restaurant owners and employees alike trust us to manage their tips.

Product and Company News

New Tip Calculation Features You Don’t Want To Miss

Big news: Kickfin’s best-in-class tip calculation tool has some exciting new bells and whistles.

If you’re already using Kickfin’s tip pool calculator, then you know how much time and hassle you’re saving by automating everything. (And if you’re not? Head over to our tip pooling software page to see how it works!)

As we partner with more restaurants to bring their tip management into the future, we’re continuing to innovate our product so we can address their biggest pain points.

In this case, that means enhancing our tip pooling features so you can auto-calculate tip amounts even for the most complex tip pool or share policies.

Check out a few of our latest features that will make tip calculations easier than ever.

🕺 Splitting large party tips

If your restaurant often hosts large parties, you know that the tip share can get confusing. Say one server is taking care of a party of 40 with a bartender assigned to only make drinks for that party. Meanwhile, the server has a few other two-top tables that are getting drinks from the main service bar. At the end of the night, how do you ensure that the large-party bartender gets their fair share of the tip out (without spending an hour on your phone calculator)?

Kickfin can now automate that process for you, alleviating questions from your event bartender and saving time and effort on the part of your managers.

📲 Seamless POS integrations

Kickfin is partnering with the top POS systems to integrate seamlessly with your existing restaurant tech — including Toast, Heartland, Shift4 and more.

DID YOU KNOW? Kickfin integration users get access to new product features first, like our new tip-out transparency tool — which allows your staff to log into their Kickfin accounts and see exactly how their tips have been split between team members. An added layer of visibility can go a long way in cultivating trust (and eliminating those pesky tip disputes).

💸 (Re)Allocation of manager tips

We’re always listening to feedback to improve the Kickfin experience, and this one goes out to all of our restaurant partners who asked us to streamline the manager tip reallocation process.

>>Learn more about managers and tipping laws

In most cases, managers are not allowed to earn tips since they are salaried employees. But we all know that managers often step in and take care of tables to help servers get out of the weeds. Well-meaning guests will most likely leave a tip, not knowing that the manager technically can’t accept them — so where does that money go?

Kickfin now features a default pool, where tips “paid” to a manager are automatically redistributed to tipped staff based on your restaurant’s tip policy.

🤓 Improved labor data accuracy

We all know how easy it is for an employee to forget to clock out after a long shift. And sure, they aren’t going to get paid for a 16-hour overnight shift, but when payday comes around, those extra hours create a nightmare for your payroll team.

With Kickfin, all employees are required to be clocked out in order to finalize payments — so you’ll catch the labor data mistake long before your payroll team has to sort it out.

🔑 Even better security

We’re committed to protecting your business (and your employees’ hard-earned money), so we’re adding an extra layer of security for certain transactions.

You can now enable double approval of payments that meet certain conditions:

First payment for new employees
Employees getting their first payout in X number of days
Employees receiving more than X payouts in a 24-hour period.

With these extra guardrails in place, you can always be sure that the right money is going to the right person. Reach out to our support team to configure your custom security measures.

Using Kickfin is a win-win for operators, managers, and employees alike. Restaurateurs save on cash delivery and labor costs, managers shave hours off their workload, and servers have the same instant payment that they’re used to — without the hassle and uncertainty of cash.

Want to learn more about Kickfin? Let us show you the ropes with a 10-minute demo!

Hiring, Training and Retention, Restaurant Management

Kickfin Announces Integration with Toast

You heard it here first: 2024 is the year of integrations.

First up — Toast! A trailblazer for cloud-based restaurant management technology, Toast is a favorite POS system for restaurants, food trucks, and bars. You probably know them best for being the first to create handheld POS devices, drastically changing the entire restaurant ecosystem. To make life easier for their customers, Toast partnered with Kickfin to create an integration that makes tip pooling, tip distribution, and calculation smoother.

As restaurant tech innovators ourselves, this partnership is the perfect fit for Kickfin.

Our goal at Kickfin is always to save time for managers, prevent loss for operators, and create more financial freedom for hospitality employees through pioneering technology that digitizes many of the analog processes that the restaurant industry is built on.

As a member of the Toast Partner Ecosystem, we’ll be able to deliver our product to Toast customers and modernize their tip management systems with ease. Using technology that they’re already familiar with, Toast customers can reap the benefits of Kickfin with minimal ramp-up upon implementation.

“No two restaurants split tips the same way, but invariably, it takes too long and involves too much risk,” said Justin Roberts, the co-CEO of Kickfin. “This integration allows for the utmost customization with a near-zero learning curve — truly the best of both worlds for restaurants that want to save time, reduce labor costs and make life easier for their team.”

And one of their partners is already enjoying the ROI with Kickfin. Bar Louie takes great pride in making tip distribution equitable for all of their employees, so they rely on a complex tip pooling system to ensure fair pay. Prior to using Kickfin, managers at each of their 60 locations spent 45 minutes at the end of every shift to make calculations and divvy out funds to all of their servers. Now, they’ve streamlined their tip-out process with Kickfin — and managers are doing the same work in less than a minute! That’s an annual average of 15,000 hours saved across their entire chain.

>> Hear more Kickfin success stories

After implementing Kickfin, managers can spend their time on what matters most: delivering excellent customer service. That means more table touches, more support for your staff, and more time to focus on server training.

With managers spending more time on the floor (instead of counting cash in the back), you’ll see better customer reviews, better service, and increased sales — all from digitizing your tip-outs with Kickfin.

We’re excited about our new partnership with Toast and the opportunity to make digital tipping a reality for their customers. For restaurants who aren’t using Toast, don’t worry! We look forward to providing similar integrations across the restaurant tech industry.

Want to see these results for yourself? Find out how to become a Kickfin integration partner or check out a demo of our platform.

Product and Company News

Kickfin Makes Inc.’s List of Top 10 Fastest Growing Companies in the Southwest

No growing pains here!

We’re thrilled to announce that Inc. listed Kickfin in their list of the top 10 fastest growing companies in the Southwest. (In fact, we earned the #1 spot in the software category and were listed as #9 overall!) We’re honored to be included alongside innovative companies that are making a big difference in our region.

Inc. measured Kickfin’s growth from 2020 to 2022 — which wasn’t an easy time for the restaurant industry, to say the least. In spite of the challenges posed by the pandemic, restaurant concepts across the country embraced Kickfin’s technology.

As a group, the 2024 Inc. honorees averaged 136% growth and created 17,606 new jobs over a two-year period. Individually, Kickfin grew by a whopping 1,304% (yes, really!).

We want to recognize and thank both our amazing customers and the Kickfin team for being part of our success story and allowing us to be a part of theirs.

Our Customers

For years, restaurants manually calculated and paid out cash tips — despite the increasing hassle and liability those old-school methods entail. It’s not because operators are tech-averse; there simply wasn’t a good way to automate the process that didn’t create new friction or require new workarounds.

That’s precisely why we developed Kickfin. Of course, we’re proud of what we built and the team behind it (more on that below). But we owe a great deal of our success to the customers who trusted us enough to give Kickfin a shot — especially those early adopters who are now some of our longest-standing customers.

There’s a leap of faith involved when you partner with a vendor and layer in new technology, particularly when it impacts something as important and sensitive as how you pay your people. We don’t take that lightly, and we are incredibly grateful for the opportunity to serve each and every customer who’s been on this journey with us.

>> Hear from our customers about their experiences with Kickfin

Our Team

Every person on our team wholeheartedly believes in our mission and vision for the future. In short: we’re here to make the tip management process insanely easy for everyone so that paying out your people is (almost!) as great as getting paid.

As backstory: Our co-founders, Brian and Justin, came up with the idea for Kickfin while dining out together and noticing that an armored car was dropping off cash. They asked why a restaurant would need a cash delivery when most patrons pay by card; the manager explained the cash was needed to pay out tips at the end of the shift. The inefficiency (and expense, and risk…) of that process was a lightbulb moment for Brian and Justin.

They set out to build a team who not only understood the problem, but could think critically and creatively about a solution — and bring it to life.

From sales and marketing to product and support, every Kickfin employee has had a hand in the growth and success of our company, thanks to their passion for our purpose and their commitment to being best in class.

We’re proud of what we’ve achieved thus far, and we’re excited to continue collaborating with our customers, innovating on their behalf, and taking Kickfin to the next level together. Onward and upward!