CashoutGlossary / Tip pool
Tip pool
An arrangement where tips from several workers go into one pot and are split by a set formula. Owners, managers and supervisors can't take from it.
In a tip pool, tips collected by several workers are combined and divided by a formula, such as hours or points. Federal law sets no limit on how much of your tips a pool can take, but it controls who can share.
- With a tip credit. If the employer pays a tipped cash wage, the pool may include only employees who customarily and regularly receive tips, like servers, bartenders and bussers.
- Without a tip credit. If everyone in the pool gets a cash wage of at least the full federal minimum wage, the pool may also include cooks, dishwashers and other back of house staff.
Either way, employers, managers and supervisors may not keep any part of employees' tips. A manager may keep only tips a customer gives them directly for their own service. The employer must pay out pooled tips by the regular payday for that workweek, or as soon as practicable after it when the amounts can't be worked out before payroll. State law can be stricter, so check your state on the tipped minimum wage pages.
For taxes, report only the tips you receive and keep from the pool, not what you put in for others. Tips you get through a pool can count as qualified tips for No Tax on Tips.
A common mistake is trusting the split without checking it. Write down what you put in and what you got back each shift. If your house splits by points, Cashout's Tip Split tool does the math and shows each person's share.
Related terms
Tip-out · Tip credit · Back of house (BOH) · Tipped employee · Qualified tips
