What Is Tip Distribution?

Tip distribution refers to the process of allocating tips among employees fairly and transparently. This process of distribution is done in a fair manner by splitting tips from the main pool from one person to another.

Tip distribution involves three steps-

• Tips can come from a variety of methods, including cash, credit cards, and digital tipping systems.
• Tips are shared according to your restaurant’s policies.
• Payouts are issued to employees, either manually or automatically via tip distribution software, and then processed through payroll or a POS system.

Tip distribution rules vary by state, including which roles can legally be included in a pool and whether kitchen staff can be part of it. Owners and managers generally can't take a cut of tips themselves under federal law.

It's worth talking about your approach with your staff before distributing, rather than just making any announcement, and checking with a labor attorney or your state's department of labor if you're unsure what's allowed.