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  #1  
Old 09-27-2012, 07:57 PM
not what you'd expect not what you'd expect is online now
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Is anyone here familiar with the tip pooling rules in California?

I need to get some clarification about the legalities of tip pooling in California and can't get through to a human being on the phone.

Can anyone here help? Here's my situation.

We are not a full service deli, more like 3/4 service. Customers place an order at the counter and then we bring the meal out to them. There are three of us out front and we all take and deliver orders based on who's free. So none of us have tables that are specifically ours. We all help where needed. Most of the time, customers tip by credit card when they pay for the food or by placing cash in the tip jar. Once in a while, they'll leave a tip on the table, but that's rare. If that even matters.

Anyway, all the tips are receipted in daily and then once a month, I pay every employee a percentage of all those tips through payroll. From the little I can find online, it seems this is okay as long as the percentage is fair and reasonable. So I'm trying to find out if that really is legal, and if so, what is fair and reasonable?

We are actually open for 6 and 1/2 to 7 hours every day. But we only have hired help for 2 or 3 of those hours on most days. So all employees are sharing in tips received even when they are not working. Also, the percentage I pay them(10% each) is in addition to the hourly pay, which is minimum wage or better.

I had a new employee quit today over this. Her mother even called me a thief.

I would never want to cheat my employees and I certainly don't want to get in trouble, so I'd sure like to get an answer about this issue.

Thanks in advance.
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  #2  
Old 09-27-2012, 08:49 PM
mhendo mhendo is offline
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You say you pay them a percentage. Does that mean that you take some of the tips for yourself or for the business before you distribute the rest to the employees?

If so, assuming that you are the owner or manager of the business, i think you might be in violation of California law:
Quote:
Additionally, tip pooling cannot be used to compensate the owner(s), manager(s), or supervisor(s) of the business, even if these individuals should provide direct table service to a patron.
The law also says:
Quote:
Labor Code Section 351 prohibits employers and their agents from sharing in or keeping any portion of a gratuity left for or given to one or more employees by a patron. Furthermore it is illegal for employers to make wage deductions from gratuities, or from using gratuities as direct or indirect credits against an employee’s wages.
Having given a GQ answer, i'll also throw in the IMHO answer: if you're the owner or manager, and you are skimming some of the tips before distributing them to your employees, then you are, in my opinion, cheating your employees.

Last edited by mhendo; 09-27-2012 at 08:51 PM..
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  #3  
Old 09-27-2012, 08:54 PM
mhendo mhendo is offline
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Want to add one thing:

I guess it's possible that, if you have no outside employees for most of the day, then that might make some sort of difference. After all, if you are an owner/operator, with no employees, then surely you can keep the tips that people give you? So what is an owner/operator supposed to do with tips earned during the time when he or she is the only person working?
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  #4  
Old 09-27-2012, 09:51 PM
Xema Xema is online now
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Originally Posted by mhendo View Post
So what is an owner/operator supposed to do with tips earned during the time when he or she is the only person working?
Presumably, keep these separate from the tips that are pooled and then distributed to employees.
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Old 09-27-2012, 10:04 PM
mhendo mhendo is offline
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Originally Posted by Xema View Post
Presumably, keep these separate from the tips that are pooled and then distributed to employees.
I'm guessing that's probably correct.
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  #6  
Old 09-27-2012, 11:52 PM
md2000 md2000 is offline
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Another point, not sure how it`s relevant to CA -

The guy I knew who ran a restaurant had a front-line worker manage the tip pool. Basically if the management collected and distributed the tips (a percent of what the server got for kitchen staff etc.) then it was considered pay and taxes, etc. would be charge and have to be withheld on the amount. In Canada the employer also pays taxes, unemployment insurance premiums, etc based on total earned income. If Joe Schmoe, server, does the distribution it`s an a greement between the workers and they can account for their own tips at income tax time.
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Old 09-28-2012, 01:08 AM
Jake Jones Jake Jones is offline
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I don't have anything to contribute factually to what mhendo provided and I hope that voicing my opinion here in GQ isn't too far out of line. The fact of the matter is, I think that the law is kind of irrelevant in this situation, even though it seems to support my position.

My assumption is that the majority of tip revenue is generated during the hours that you have employees on the clock. My opinion is that the proprietors of the business should not participate in the tip pool, at all. You should be running your business such that tips are not factored into your profitability and should be considered a benefit to your minimum wage or better employees. I think that tips should be pooled per pay period (not per month) and split on an hours-worked basis.

$400 in tips for a week with total employee time clocked at 40 hours = $10 per hour worked. Two employees who worked 15 hours each get $150 and the third employee who worked 10 hours gets $100. Pay rolled and taxed. The house needs to earn its revenue on profit margin, not tips, no matter how hard you work.

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Originally Posted by md2000 View Post
Basically if the management collected and distributed the tips (a percent of what the server got for kitchen staff etc.) then it was considered pay and taxes, etc. would be charge and have to be withheld on the amount. In Canada the employer also pays taxes, unemployment insurance premiums, etc based on total earned income. If Joe Schmoe, server, does the distribution it`s an a greement between the workers and they can account for their own tips at income tax time.
In other words, the employers avoid payroll taxes and the employees avoid income taxes. I don't know if that's actually legal in Canada (seems unlikely), but it's not in the US. Servers under-report tips as a general practice here, but that doesn't make it legal.
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Old 09-28-2012, 08:47 AM
What the .... ?!?! What the .... ?!?! is online now
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Originally Posted by mhendo View Post
Having given a GQ answer, i'll also throw in the IMHO answer: if you're the owner or manager, and you are skimming some of the tips before distributing them to your employees, then you are, in my opinion, cheating your employees.
Do I have to provide a GA before being allowed an IMHO? Assuming not mine is that tips are for services and anybody who provides those services should be able share in them without being considered a cheater.
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  #9  
Old 09-28-2012, 08:57 AM
BrotherCadfael BrotherCadfael is offline
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My personal rule for tip pooling is not to patronize any restaurant which pools tips.

I don't mind a deal where the back-end staff get a cut, but I strongly object to any deal where the outstanding servers and the deadwood all get the same. I have never had good service from any place where they pool tips.

More precisely, I have never had good service from any place where I actually know that they pool tips - some places publicize the policy (as though it was something to be proud of), but others may not.
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Old 09-28-2012, 10:59 AM
moejoe moejoe is offline
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Originally Posted by BrotherCadfael View Post
My personal rule for tip pooling is not to patronize any restaurant which pools tips.

I don't mind a deal where the back-end staff get a cut, but I strongly object to any deal where the outstanding servers and the deadwood all get the same. I have never had good service from any place where they pool tips.

More precisely, I have never had good service from any place where I actually know that they pool tips - some places publicize the policy (as though it was something to be proud of), but others may not.
Also IMHO- I imagine that your servers hate this method whether it's legal or not. One of the few good things about a server job is that you leave your shift with some cash in your pocket. Adding the tips to pay period means almost nothing since server pay is usually so low, and sharing tips with other shifts is even worse. You may as well just tell them your tips are mine and I'll share with you if and when I feel like it. Is there a big problem with just splitting the cash evenly among the servers at the end of each shift?
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  #11  
Old 09-28-2012, 12:35 PM
md2000 md2000 is offline
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Originally Posted by Jake Jones View Post
In other words, the employers avoid payroll taxes and the employees avoid income taxes. I don't know if that's actually legal in Canada (seems unlikely), but it's not in the US. Servers under-report tips as a general practice here, but that doesn't make it legal.
Potaytoe, potahtoe.

If Sally makes a $10 tip (whether or she shares it with Joe), the employer pays no payroll taxes on it, is not required by law to withhold income tax, etc.

If the employer takes a share of the tip, and then gives it to the employees, it is "money from your employer", or as Canada Revenue Agency calls it - employment income. The rules basically do not allow you to pay cash bonuses, free meals, endorse your parking, slip you $10, or any other trick whereby the employer gives a benefit to the employee and does nto count it as income.

Yes, Sally and Joe have to declare the tips on their income tax at the end of the year.

I think the biggest hassle was not whether it added a few dollars to the payroll taxes; it was the book-keeping hassle of accounting for all this. Like most small businesses here, they ue a payroll agency. Phone in the hours and rate, the payroll company generates direct deposits, does all the tax remittance and tax form. Now figure in that you have to, each pay period, make an adjustment on everyone's pay stub to account for cash distributed, etc. they payorll company does not want the headache either. Too much data entry, too much error.

Odds they'd be called on it by the CRA? Pretty low. Cost if they are charged for not doing the remittance right? Very expensive.

It's not tax avoidance, it's hassle avoidance.
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  #12  
Old 09-28-2012, 12:55 PM
dracoi dracoi is offline
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md2000, I don't know Canada's rules, and the OP is not asking about Canada's rules. What you describe is illegal in California because it's illegal everywhere in the US. Employees are required to report tips to the employer if they receive more than $20 in a month, and employers who collect and distribute tips are required to report any amount. Either way, tips become part of payroll and payroll/income tax is withheld. There's a form on the personal tax return for unreported tips, but this is basically there for people who screwed up and didn't do it right to begin with.

Here, the only way to legally practice what you call "hassle avoidance" is to not accept tips.

For the OP: As others have mentioned, the law restricts the owner from keeping tips that are pooled, but nothing prevents the owner from keeping tips given directly to the owner. If you are the only one working, then keep those tips separate from the tips you pool.

In addition: Tips should be divided up based on hours worked. Someone should get 10% only if they worked 10 hours and all employees together worked 100 hours. My recommended practice for pooled tips is to calculate this every night. If there were $60 in tips and 30 man-hours worked that night, then everyone gets $2 in tips per hour worked. But if you're just giving every employee a fixed 10% regardless of hours worked, that fits my definition of "unfair" because you're penalizing the employees who work the most hours.
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  #13  
Old 09-28-2012, 01:01 PM
Patty O'Furniture Patty O'Furniture is offline
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Originally Posted by not what you'd expect View Post
the percentage I pay them(10% each) is in addition to the hourly pay, which is minimum wage or better.
What happens to the other 90%? If I'm a customer putting a dollar in the tip jar, it's because I want the waitstaff to get a dollar, not a dime.
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  #14  
Old 09-28-2012, 01:11 PM
md2000 md2000 is offline
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Thanks, dracoi, I'd never heard of that. Having to tally and report tips to the boss seems incredibly petty and annoying; your government at work. I suppose this means I should tip cash rather than on the credit card bill when in the USA?

Yes, the comment about 10% has me curious too. Every employee should take home approximately what they made in tips, it should average out over the workday - unless the amount is shared with kitchen workers who don't get any tips - or the tips are particularly lean during the daytimes when there are no extra servers. If you are keeping the lion's share for yourself, then no wonder the mother was upset.

(In the tip pool I described, each server paid 2% of the total bill - not tips - into the kitchen help pool.... so theoretically, 1/5 of a 10% tip. It provided a decent amount for the kitchen help, while leaving the good servers to come out ahead of the poor ones... and all the servers kept the main part of their tips. I suspect most severely underreported actual tips at tax time. Welcome to Canada. )

Last edited by md2000; 09-28-2012 at 01:15 PM..
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  #15  
Old 09-28-2012, 02:20 PM
Rachellelogram Rachellelogram is offline
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First of all, the outrage here is misplaced. These employees are being paid at least minimum wage already. Most servers get less than $3 an hour and count on tips as part of their regular income.

But secondly, OP: you need to hire an accountant (or consultant). You cannot rely on the wisdom of the internet to run your business. If you're messing this up from a legal standpoint (which it appears you very well may be), there's no telling what else you might be doing wrong. State laws vary. Certain municipalities may have their own rules. It takes more than a love of food to run a restaurant, it takes savvy. If you don't have that savvy, you have to pay for it. You may also be advised (by said accountant/consultant) to get a more sophisticated register and/or order system, so you can track which employees were on the clock during which orders.

Thirdly--whether or not it's illegal, you should not apportion tips like this. It's highly demotivational when a hard worker is not rewarded commensurate with their talent and effort. Your best employees will begin sliding toward mediocrity when greatness doesn't garner a better reward. There are dozens of restaurants in every city in the country who manage to handle tips right, so the expertise is out there and shouldn't be very expensive.
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  #16  
Old 09-28-2012, 02:29 PM
Telemark Telemark is offline
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Quote:
Originally Posted by Patty O'Furniture View Post
What happens to the other 90%? If I'm a customer putting a dollar in the tip jar, it's because I want the waitstaff to get a dollar, not a dime.
10% each, in a perfect world to 10 employees.
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  #17  
Old 09-28-2012, 02:33 PM
dracoi dracoi is offline
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Originally Posted by Rachellelogram View Post
First of all, the outrage here is misplaced. These employees are being paid at least minimum wage already. Most servers get less than $3 an hour and count on tips as part of their regular income.
CA is one of several state that requires tips to be paid on top of minimum wage. The same is true here in WA... where we also have the highest minimum wage in the US (9.04). So the OP's workers have a much better deal than they'd get in some states, but worse than they'd get in most other CA restaurants.

(Which just goes to prove your point about why local laws are so important and why experts needs to be consulted.)
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  #18  
Old 09-28-2012, 02:55 PM
SmellMyWort SmellMyWort is offline
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Originally Posted by BrotherCadfael View Post
My personal rule for tip pooling is not to patronize any restaurant which pools tips.

I don't mind a deal where the back-end staff get a cut, but I strongly object to any deal where the outstanding servers and the deadwood all get the same. I have never had good service from any place where they pool tips.

More precisely, I have never had good service from any place where I actually know that they pool tips - some places publicize the policy (as though it was something to be proud of), but others may not.
I think this is a good philosophy, but it's not really germane to the OP's situation. We're not really talking servers here in the traditional restaurant sense. These are deli counter workers that carry orders out to the patrons and that's it. There is no real evaluation of the server and this is proven by the fact that the OP says most tips are given before service is even rendered. It sounds like the setup at Culvers or Panera ("what, you're out of breadbowls!") and similar type places. I doubt most people tip at all. So OP, what sort of $ amount are we talking here. Did this new worker quit because she's not getting the $2/day she thinks she's owed?
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Old 09-28-2012, 03:32 PM
Dano83860 Dano83860 is offline
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You don't say how many employees you have so the 10 percent is meaningless. If you are keeping any of the tips than yes IMO you are cheating your employes.
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Old 09-28-2012, 05:52 PM
njtt njtt is offline
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Originally Posted by Dano83860 View Post
You don't say how many employees you have so the 10 percent is meaningless. If you are keeping any of the tips than yes IMO you are cheating your employes.
Well, hang on there, as I understand it the OP/owner is doing all the serving most of the day, and still doing his share in the busy period when he has staff in. I agree that it does sound as though he is holding on to an unfairly large cut (though it is hard to tell from the information given), but I don't see that the help should be getting all the tip money when they are not even there when much of it is given.
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Old 09-28-2012, 10:28 PM
Jake Jones Jake Jones is offline
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Originally Posted by md2000 View Post
Thanks, dracoi, I'd never heard of that.
Did you mean that you'd never heard it twice?
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  #22  
Old 09-29-2012, 08:54 AM
md2000 md2000 is offline
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Originally Posted by Jake Jones View Post
Did you mean that you'd never heard it twice?
A quick re-read of the thread, I still don't see anywhere earlier saying that servers must report all tips to management based on IRS rules and get tax deducted for them. Frankly, that's brand new information, I have never heard of it before, once, or twice, or ever. Interesting. Thanks, Dracoi.

As I said, in Canada, servers self-report at tax time. Oddly enough, this seems to lead to underreporting. I can only conclude that Canadian servers are bad at math and I should double-check all my bills.

A tip is income from work, but not income from the employer, so the employer does not have to deal with any tax issues for tips. As a side effect, the amount cannot be calculated as part of income, minimum wage still applies.

Last edited by md2000; 09-29-2012 at 08:58 AM..
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  #23  
Old 09-29-2012, 09:03 AM
md2000 md2000 is offline
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Originally Posted by Telemark View Post
10% each, in a perfect world to 10 employees.
As I said, then each server should take home roughly what they made in tips (in addition to minimum wage). Everything should even out in the long run.

So either Mama misunderstood, her daughter misspoke the details, daughter works during "really good tip time", and is subsidizing other hours, or the math did not work out to 10 each at 10%..
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  #24  
Old 09-29-2012, 09:56 AM
Ostrya Ostrya is offline
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I think the most fair method would be to allow the specific employee to receive the specific tip given. I like to tip but are reluctant to contribute to a tip jar or some kind of pool. When I tip I I try to assure (by asking) that the tip - all of it - will go directly to the person serving me. They are inspiring the tip, and how much over the usual 15 percent I would tip at a restaurant.

I recently had exceptional service at a fastfood drive through, and before driving away with my order asked the person "can I give you a tip?" They said sure so I gave them 5 dollars, which was approx 50% of the price of the order. I would not have given any tip if my understanding was that the tip would be put into some kind of pool or general fund to distribute to all the employees. That is not fair. Some people are especially presentable, some not so much. I see this all the time. There is a reason that some employees generally receive greater tips than their coworkers. Those people are averaging more tips because they essentially make the customer happier, more satisfied with the service. This system may have flaws but to me seems the most fair.

I also realize that this opinion of my ideal is not always practical, and may not be practical in this case. Just wanted to give this opinion though, that I think ideally the person who inspired any given tip should be allowed to keep the whole thing, and take their own responsibility for reporting this to the irs or not. It should not be any of the owner's business to handle the tips.
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Old 09-29-2012, 10:10 AM
kayaker kayaker is online now
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Originally Posted by the lone cashew View Post
When I tip I I try to assure (by asking) that the tip - all of it - will go directly to the person serving me.
That's why I always place the bill(s) directly down her blouse.

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  #26  
Old 09-29-2012, 10:11 AM
HoneyBadgerDC HoneyBadgerDC is offline
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The deli in question is not full service, they simply deliver the food to the table when it is done. Orders are taken at the counter. These tips should be pooled, cash reciepts should be time stamped and all orders taken durring the employees hours should be divided equally with none going to the owner. If the owner has adult children or relatives they should be included in the tip pool.
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Old 09-29-2012, 08:13 PM
not what you'd expect not what you'd expect is online now
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I guess I did not do a good job of explaining how things work here. Let me try again.

Customers order and pay for their food at the counter. Better than 98% of the tips are received at this time, either in the tip jar or added to the credit card payment. So, before they get their food. Our tips average 6% of our sales. Very rarely, we will have a tip just left on the table.

We are open from 8ish until 3ish. For the better part of the day, it is just my husband and myself. I take the order, collect the money and deliver the food and the whole shebang. Currently we have four people that come in and help us from 11:30 to 1:30. I did a recap of sales by the hour and we do about 60% of our business during the 2 hours we have help. The other 40% is spread out during the rest of the day when it's just my husband and myself.

So when it isn't just me up front, we all rotate from the register to the tables. We all serve, ring up, clean tables, etc. No one has assigned tables. So unless it's just me, the customer doesn't know who will bring him his food at the time that he is leaving a tip.

So, because of the way tips are received, I just receipt all the tips in as income. Then everyone gets 10% of that total. So, they get 10% of tips received even when they aren't there. Even if they have the day off, they still get 10% of the days tips.

I thought this seemed fair and for what it's worth, my other employees are fine with this arrangement. I do pay this through payroll, so taxes are being paid by me and I never skim off any tips.

Is that more clear? I was mostly just trying to simplify the accounting when I set it up this way.
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Old 09-29-2012, 08:17 PM
dracoi dracoi is offline
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You honestly believe that it's fair to give people a portion of tips earned when they don't work?
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Old 09-29-2012, 09:32 PM
moejoe moejoe is offline
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Originally Posted by not what you'd expect View Post
I guess I did not do a good job of explaining how things work here. Let me try again.

Customers order and pay for their food at the counter. Better than 98% of the tips are received at this time, either in the tip jar or added to the credit card payment. So, before they get their food. Our tips average 6% of our sales. Very rarely, we will have a tip just left on the table.

We are open from 8ish until 3ish. For the better part of the day, it is just my husband and myself. I take the order, collect the money and deliver the food and the whole shebang. Currently we have four people that come in and help us from 11:30 to 1:30. I did a recap of sales by the hour and we do about 60% of our business during the 2 hours we have help. The other 40% is spread out during the rest of the day when it's just my husband and myself.

So when it isn't just me up front, we all rotate from the register to the tables. We all serve, ring up, clean tables, etc. No one has assigned tables. So unless it's just me, the customer doesn't know who will bring him his food at the time that he is leaving a tip.

So, because of the way tips are received, I just receipt all the tips in as income. Then everyone gets 10% of that total. So, they get 10% of tips received even when they aren't there. Even if they have the day off, they still get 10% of the days tips.

I thought this seemed fair and for what it's worth, my other employees are fine with this arrangement. I do pay this through payroll, so taxes are being paid by me and I never skim off any tips.

Is that more clear? I was mostly just trying to simplify the accounting when I set it up this way.
Here's an idea, how about you clear the tip jar when the first of your non-family staff starts their shift, that's for you, put it in your pocket. Then at the end of the regular staff shift let them split up the cash in the tip jar and take it home with them. That way everyone gets their fair share of the tips for the shifts they work and you don't have to give your tips up to shift workers who are there less hours than you over the course of the day. Everyone deals with the IRS just like all servers do by estimating and claiming their tips. Because it really sounds like the issue here is that you think you deserve a share of the tips and this is how you're getting it. I can tell that you're trying to do the fair thing here, but as my mother used to say fair and equal are often different things.

The way I see it it's not just about workers getting a share of tips when they weren't working, but that none of your staff gets their full share of tips on days when they do work. If someone works more than 10% of the shifts but only gets 10% of the tips they're getting screwed.
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Old 09-30-2012, 08:12 AM
What the .... ?!?! What the .... ?!?! is online now
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Originally Posted by moejoe View Post
Here's an idea, how about you clear the tip jar when the first of your non-family staff starts their shift, that's for you, put it in your pocket.
Very good idea! Hopefully California doesn't have a rule against that.
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  #31  
Old 09-30-2012, 08:29 AM
md2000 md2000 is offline
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Huh?

So 4 servers share 40% of the tips. Perhaps averaging by month or week rather than day or shift is acceptable. Part of the problem is the tips are paid at the register before the customer "belongs" to any server.

You have to decide what's fair - split equally or split by hours. Your answer lies somewhere in between, and does not seem fair by either choice. You are taking 60% minus taxes (I assume) for two of you?

I'm not understanding - Dracoi says all tips are reported daily to the employer by IRS law, moejoe implies servers handle reporting their own tips - which is it?

Moejoe is right. Fairest is to keep separate owner and non-owner times, and split the non-owner tips among the other employees by hours worked. The longer the average, the more evened out. Maybe each week...

If its a pain to separate credit tips, then pool all tips, but include the owners in the hourly calculations. But... Giving yourself more than the others seems unfair. How it is calculated has to be clear and fair and equal for everyone. 10 for you 60 for me does not seem fair.
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  #32  
Old 09-30-2012, 10:14 AM
doreen doreen is offline
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Originally Posted by md2000 View Post
I'm not understanding - Dracoi says all tips are reported daily to the employer by IRS law, moejoe implies servers handle reporting their own tips - which is it?
Both- employees who receive more than $20 in tips for a calendar month are supposed to report it to their employer and the employer is supposed to include it on the W2 and withhold taxes on it (which in states other than California can result in a paycheck of $0). But all tips are income, and each individual is required to report all income on the tax return - so if a McDonald's employee gets a $10 tip for a birthday party once a month, it would not be reported to the employer, but should be reported on the tax return.

IRS publication
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  #33  
Old 09-30-2012, 01:14 PM
dracoi dracoi is offline
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Originally Posted by md2000 View Post
I'm not understanding - Dracoi says all tips are reported daily to the employer by IRS law, moejoe implies servers handle reporting their own tips - which is it?
Here's an example of how it works in a more standard restaurant:

$500 in tips were paid on credit cards, using the line on the receipt for tips. These are obviously collected by the employer through their merchant service. Thus, the employer already knows this amount, and they know how it gets paid out (whether a pooled system or a system that pays directly to employees).

$500 in tips were paid in cash and the server stuck these in a jar, to be divided up later. Two employees count the cash, record the total and record the amount split with each employee. The employer gets a report showing the amounts received and paid. (Alternatively, each employee prepares their own form at month-end to report tips received. This isn't all that common.)

$50 in tips were paid in cash and the servers did not put this in the jar. They'll need to fill out a form at the end of the month to let their employer know they received the tips (this is the best-practice that fully complies with all rules). Or, they'll need to fill out a form and report it to the IRS at year-end (while this doesn't fully comply with all rules, the IRS still gets their money in the end). Or they keep the money and don't report it all (common, but illegal).
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Old 09-30-2012, 02:03 PM
elbows elbows is offline
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If managers or owners, even if they are working a shift, are taking a cut of the tips, you are stealing from your employees, in my mind. Not that restaurants don't routinely get away with much worse, they do.

Don't do this, it is never, ever worth the small amount of money you're putting in your pocket. It costs you large to two very important ways. Firstly it will take no time for this fact to circulate in the industry where your operate. Once it does, you will find it very difficult to attract the best wait staff. So so staff, love this kind of set up, the star servers hate it. And secondly, your servers are, in so many ways your partners, you do not want them to feel poorly used. Ever. You are giving them leave to drink your booze, give your product away, and bend all the rules, because they will feel exploited. It's a really hard thing to turn around once it sets in. Be aware.

Both of these issues have the potential to destroy your business, it really doesn't take much in a small restaurant/deli. It will never be worth, whatever you're making in tips, in the long run. Resist the urge!
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  #35  
Old 09-30-2012, 04:50 PM
drachillix drachillix is offline
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Originally Posted by mhendo View Post
I'm guessing that's probably correct.
Paging Diosabelissima who I am pretty sure should have some insight on the legalities of this.
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  #36  
Old 09-30-2012, 05:01 PM
drachillix drachillix is offline
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Originally Posted by elbows View Post
If managers or owners, even if they are working a shift, are taking a cut of the tips, you are stealing from your employees, in my mind. Not that restaurants don't routinely get away with much worse, they do.

Don't do this, it is never, ever worth the small amount of money you're putting in your pocket. It costs you large to two very important ways. Firstly it will take no time for this fact to circulate in the industry where your operate. Once it does, you will find it very difficult to attract the best wait staff. So so staff, love this kind of set up, the star servers hate it. And secondly, your servers are, in so many ways your partners, you do not want them to feel poorly used. Ever. You are giving them leave to drink your booze, give your product away, and bend all the rules, because they will feel exploited. It's a really hard thing to turn around once it sets in. Be aware.

Both of these issues have the potential to destroy your business, it really doesn't take much in a small restaurant/deli. It will never be worth, whatever you're making in tips, in the long run. Resist the urge!
My only thoughts on this is this is not a standard tip driven full service restaraunt situation. There is no indivdualized service who rings you up, who makes your food, and who brings it to you are all luck of the draw and will most likely be different people. Its a hybrid situation calling for some further consideration.

Should the owners be getting 60% of the tips...no
should they be getting something considering they do provide 100% of the service for 40% of the working day...yes.
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Old 10-01-2012, 06:32 AM
elbows elbows is offline
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Should the owners be getting 60% of the tips...no
should they be getting something considering they do provide 100% of the service for 40% of the working day...yes.
I understand why you'd think that. But you'd be wrong. Owners and managers should, never, ever, be part of the tip pool. It's bad business. And the small amount of money involved will never be worth, what it will end up costing the business, in the long run. It will only make your staff feel ill used. That will end up costing you far more, believe me.

In a small business goodwill of your staff can prove to be the difference between success and failure.

It's a rookie mistake that an experienced restaurateur would never make, in my opinion.
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  #38  
Old 10-01-2012, 11:23 AM
drachillix drachillix is offline
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The pizza place I worked at did something similar but it was just all tips into the jar, split equally among everyone on duty, manager on duty was included in this and nobody thought twice about it.
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  #39  
Old 10-01-2012, 11:57 AM
elbows elbows is offline
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This sounds more like, they save it up for a week, then a manager, (who wants a cut!), divides it up according to; Hours? Number of shifts? Number of busy shifts?

It's a recipe for disaster. There is no conceivable way that the 'others' are going to believe it is being fairly done, in my opinion.
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Old 10-01-2012, 12:43 PM
SmellMyWort SmellMyWort is offline
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The CA law seems pretty clear that the house shouldn't be keeping ANY of the tip money and does not provide different rules for "tip bucket" type scenarios. This may mean a little less profit for the business, but hopefully happier, more faithful employees.
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  #41  
Old 10-11-2012, 09:55 AM
What the .... ?!?! What the .... ?!?! is online now
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Originally Posted by elbows View Post
If managers or owners, even if they are working a shift, are taking a cut of the tips, you are stealing from your employees, in my mind. Not that restaurants don't routinely get away with much worse, they do.
Stealling?

It may be a violation of California law but that doesn't make it stealing.

... or perhaps you are a bit over the top with your moral or ethical judgements??

It may very well be bad business but it seems perfectly fair to compensate people who do the same things the same way. That they also receive add'l compensation based on other factors (the investment in and risk of owning a business) doesn't negate that.
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Old 10-11-2012, 11:42 AM
Mama Zappa Mama Zappa is online now
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Reading this: "So, because of the way tips are received, I just receipt all the tips in as income. Then everyone gets 10% of that total. So, they get 10% of tips received even when they aren't there. Even if they have the day off, they still get 10% of the days tips. " but you mention having only 4 employees. Each of those 4 gets 10% of all the tips, so a total of 40%. Where is the other 60% going? to you and your spouse?

While I don't have a huge issue with your getting some of the tip money since you're manning the tables etc. when nobody else is there, others have suggested that it's not kosher to do so and may not even be legal.

As long as the income is documented and the appropriate taxes withheld, and declared in the W2s, I wouldn't fret about the taxes. I don't recall whether tips are subject to Social Security rules (I would hope not).

Given the type of business, you can't really give tips to the individual servers as a full-service restaurant would, so pooling is really the only option - the dilemma seems to be in *how* the pooling is done.

Personally, I'd suggest you go with an approach where you segregate out tips received when you're solo (no employees), vs. when you have employees, and divide the 'with-employees' tips up among those employees based on hours worked. At the very least, doing this "on paper" for a week or two will let you see whether they're benefitting or losing out by your current approach.
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Old 10-11-2012, 11:46 AM
dracoi dracoi is offline
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Originally Posted by What the .... ?!?! View Post
Stealling?

It may be a violation of California law but that doesn't make it stealing.

... or perhaps you are a bit over the top with your moral or ethical judgements??

It may very well be bad business but it seems perfectly fair to compensate people who do the same things the same way. That they also receive add'l compensation based on other factors (the investment in and risk of owning a business) doesn't negate that.
To quote Office Space:
Quote:
JOANNA: Ok. So you're gonna make a lot of money, right?
PETER: Yeah.
JOANNA: Ok. That's not yours?
PETER: Well, it, it becomes ours.
JOANNA: How's that not stealing?
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  #44  
Old 10-11-2012, 12:29 PM
SmellMyWort SmellMyWort is offline
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Originally Posted by dracoi View Post
To quote Office Space:
I walk into a deli. The person behind the counter greets me in a friendly manner, tells me the day's special, and takes my order. There is no one else working so it's clear that this same person will make my order and bring it out to me. I appreciate that and add a tip when I pay. The meal I'm served is beyond expecations and the worker offers to refill my drink even though it's a self-service fountain. I leave an extra buck on the table. Little do I know the person I left a tip for is the owner and by CA law must give my tip to employees that were nowhere to be seen during my visit. Maybe the owner is happy to do it but the only single reason it is even close to stealing is due to CA's warped definition. But yeah, +1 for an Office Space quote.
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  #45  
Old 10-11-2012, 11:34 PM
Nefarious Chipmunk Nefarious Chipmunk is offline
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Originally Posted by moejoe View Post
Here's an idea, how about you clear the tip jar when the first of your non-family staff starts their shift, that's for you, put it in your pocket. Then at the end of the regular staff shift let them split up the cash in the tip jar and take it home with them. That way everyone gets their fair share of the tips for the shifts they work and you don't have to give your tips up to shift workers who are there less hours than you over the course of the day. Everyone deals with the IRS just like all servers do by estimating and claiming their tips.
I have worked a few jobs similar to a deli (with a counter) and this is how we did it in all the places I have worked. In fact, we would split up the tips whenever someone started or left a shift to make sure your got your share for when you were working.

FWIW, this was in California.
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  #46  
Old 10-12-2012, 03:40 AM
Audrey Levins Audrey Levins is offline
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Why does everybody get ten percent of the tips? Where did the ten percent come from? What happens to the other ninety percent? Am I just sleep deprived?

Help.
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  #47  
Old 10-12-2012, 06:18 AM
Manda JO Manda JO is online now
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Originally Posted by not what you'd expect View Post
We are open from 8ish until 3ish. For the better part of the day, it is just my husband and myself. I take the order, collect the money and deliver the food and the whole shebang. Currently we have four people that come in and help us from 11:30 to 1:30. I did a recap of sales by the hour and we do about 60% of our business during the 2 hours we have help. The other 40% is spread out during the rest of the day when it's just my husband and myself.
From this, I think you are short-changing your employees a bit. They should be getting one fourth of 60% of the tips each (so 15% of the total), not 10%. I agree that clearing out the tip jar when people come on shift is really the only fair way to do it.
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  #48  
Old 10-12-2012, 08:42 AM
Nefarious Chipmunk Nefarious Chipmunk is offline
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I also assume that you are the busiest when the extra help is present, so that is when the most tips would be generated, no? Because of that, using time in shop to determine percentage seems a bit off base.
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  #49  
Old 10-13-2012, 03:16 AM
not what you'd expect not what you'd expect is online now
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Originally Posted by Manda JO View Post
From this, I think you are short-changing your employees a bit. They should be getting one fourth of 60% of the tips each (so 15% of the total), not 10%. I agree that clearing out the tip jar when people come on shift is really the only fair way to do it.
Well, I actually had six employees at one point and wasn't sure how many we'd keep. I also had my first two employees at 25% each until we hired the 4 others.

It would be difficult to count the jar during the lunch rush though since I stagger the help a bit. I would have to stop waiting on customers to do it.

I've talked to all my remaining employees and they are fine with how I'm doing it. They are allowed to do homework when things are slow and they get a lot of free food and I never refuse them a time off request. But perhaps I need to increase the % a bit until we hire more.

Thanks for the input everyone.
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  #50  
Old 10-13-2012, 08:02 AM
Manda JO Manda JO is online now
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Originally Posted by not what you'd expect View Post
Well, I actually had six employees at one point and wasn't sure how many we'd keep. I also had my first two employees at 25% each until we hired the 4 others.

It would be difficult to count the jar during the lunch rush though since I stagger the help a bit. I would have to stop waiting on customers to do it.

I've talked to all my remaining employees and they are fine with how I'm doing it. They are allowed to do homework when things are slow and they get a lot of free food and I never refuse them a time off request. But perhaps I need to increase the % a bit until we hire more.

Thanks for the input everyone.
I think it's ok to keep dividing all the tips between all the employees, regardless of when they worked, but you shouldn't be taking a share of any tips given while any employee is on the clock. That's the part that is technically illegal and could look like something really foul: remember, these rules were put in place because of owners who took a 50% "commission" off any tip their waiters received and stuff like that. If you doubt that's possible, look at the thread right now in IMHO where people are discussing "dine and dash": even though it it totally illegal, it's still not uncommon to hear of a server who is told they have to pay for the entirety of a skipped check--and servers are a class of people who usually do not have the ability to fight this sort of thing even when they know it's illegal.

So you want to avoid even the appearance that the owner is taking any of the server's tips. Whether or not the tips are distributed perfectly fairly among the servers is much, much less important. So what I would do is some time before the first server gets there--when it is still slow--bag the tip jar, mark the time and date, and put it in the safe. Later, you can count and enter that as income. It's 100% yours. Then, when the last server leaves, bag the tip jar again. That gets split evenly between all four servers at the end of the week. End of the day, whatever is left in the tip jar is again yours.
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