What Are Restaurant Tips?

Restaurant tips are the extra money customers give to the staff members who have served them well and provided a great customer experience. In the US, tipping is a big part of how restaurant workers get paid, especially servers and bartenders. Most guests leave somewhere between 15% and 20% for good service, and often more sometimes.

Under federal law, you can pay tipped workers a lower cash wage, as low as $2.13 an hour, as long as their tips bring them up to at least the full minimum wage. If they don't, you have to cover the difference. Some states don't allow this at all and require the full minimum wage before tips.

Tips are also taxable income. Your staff has to report them, and you have to include them in payroll. Card tips get paid out with the paycheck or in cash, depending on your setup, and you should do it on a regular schedule so nobody is waiting on their money.

Now, who gets to keep the tips? Owners and managers can't take any part of them. Only your staff can. You can set up a tip pool or a tip-out to share with bussers, bartenders, and hosts, but check your state's rules first.

Be clear with new hires about how tips work on day one. When people understand the system, there are far fewer problems later.