Restaurant Employee Tip Handling

The History Of Restaurant Employee Tip Handling

No one knows when tipping began.  But we do know that in the 1980's the IRS levied new regulations on restaurant owners to track the tips received by the employees of the restaurant.

The magic number of 8% became the benchmark for servers and waiters to declare as their tipped earned.  Not because it was accurate.  Rather, because it was the minimum amount allowed by the IRS.

The trick is this.  Tipped employees are generally not paid minimum wage.  The amount varies from state to state but it runs between $2.15 to $3.15 per hour.  The IRS assumes that the tips received will make up the difference between this low hourly amount and the true minimum wage of $5.15 per hour.  If this is not the case, then it is up to the restaurant owner to make up the difference between what the tipped employee earned + declared tips and minimum wage.  This makes accurate tip declaration, tracking and reporting a vital aspect of running a restaurant.

The Need For Restaurant Employee Tip Handling

You need a system that recognizes tipped employees, tracks their individual sales, any charge tips collected and requires them to declare cash tips at the end of their shift.

You also need a system that can handle tip sharing, tip pooling and tip out to bus help, bartenders and other servers.

You need a system that will track the hours worked and tips collected and recognize problems with employees not declaring enough tips to meet the minimum wage requirements.

The Solution Of Restaurant Employee Tip Handling

DirecTouch Point of Sale has tip tracking built into our time in attendance module that comes standard with our software.  Once you select an employee as a tipped employee the system will require tip declaration prior to clock out.

Servers and waiters who ring sales will have their total sales tracked.  Tips collected through credit card sales are tracked and shown on the server closeout report.  Prior to clock out the server/waiter will be shown their total sales, the charge tips collected and then asked to declare their cash tips.

DirecTouch Point of Sale does allow for programming flexibility with this feature:

• You may change the minimum declaration from the default of 8%.
• You may change the requirement to declare tips at clock out.
• You may opt to have the system print a chit with their tips shown.
• You may opt to not show charge tips on the declaration screen.

The Benefit Of Restaurant Employee Tip Handling To You

How do you measure the amount of relief a person can have knowing that your point of sale system is enforcing tip regulations levied by the IRS?  Not to mention the mass amount of time savings in tracking declared tips, charge tips and hour worked for every tipped employee.

This is one headache you don't want to have to deal with.  If you have tipped employees you need a good point of sale system with tip tracking and time and attendance.

The Setup Of Restaurant Employee Tip Handling

This feature must be set for each employee that is a tipped employee.

1. Enter Security Access Number
2. Click "Manager Menu"
3. Click "Employee Maintenance"
4. Click "Employee Maintenance" from the pop-up window
5. Click "Payroll Information" tab
6. In the "Job Titles" area click the first field and select the appropriate job code, enter the correct pay rate and then select "Hourly" and "Tipped"  This will set the employee as a tipped employee.
7. Click "Save"
8. Click "Exit"
9. Exit back to sign on screen.
10. The employee is now considered a tipped employee and will be required to declare cash tips at the end of their shift.

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