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Early Access to Earned Wages: A Solution for Cashless Tipping

Mar 16, 2023 9:30:00 AM

Tip pooling and tip sharing have become increasingly popular as tools for incentivizing servers and other members of restaurant teams to perform their best. However, when it comes to these kinds of daily pay calculations, things can get pretty tricky, especially when complying with state and federal laws. Many restaurant owners and managers spend a huge chunk of their time handling tip payouts and other complex daily pay calculations, and that’s time that could be spent managing other essential aspects of the business. 

Let’s look at the complexities involved with this method of managing tips and the solution that simplifies everything. 

What are tip pooling and tip sharing? 

Tip pooling and tip sharing allow employers to incentivize their employees by collecting and distributing tips in different ways. 

With tip-pooling, servers contribute a certain amount of their tips, and managers redistribute these earnings to the other team members. Sometimes servers share all of their tips, which can lead to strife with high-performers. 

Tip sharing is where a server will give a certain percentage of their tips to other support staff to thank them for their contribution. Many servers that work at restaurants serving alcohol are familiar with tipping out bartenders, but sometimes servers will tip out their hosts and bussers as well. 

What are the laws surrounding tips? 

There are many laws around how employers and managers can handle tips for their employees. For example, managers or employers can’t withhold or keep tips for any reason. Here are a few more rules to be aware of from the Department of Labor

  • an employer that pays the full minimum wage and takes no tip credit may allow employees who are not tipped employees (for example, cooks and dishwashers) to participate in the tip pool;
  • an employer that collects tips to facilitate a mandatory tip pool generally must fully redistribute the tips within the pay period; and,
  • employers that do not take a tip credit, but collect employees’ tips to operate a mandatory tip pool, must maintain and preserve payroll or other records containing information on each employee who receive tips and the weekly or monthly amount reported by the employee, to the employer, of tips received.

States have different laws when it comes to paying employees, including how to manage tips. Be sure to keep up with specific legislation for your state. 

What is the best solution for paying out tips? 

One of the biggest headaches restaurant owners and managers face is paying out tips at the end of the night. Handling all of that cash can be a huge burden, especially when trying to ensure compliance with federal and state laws. Also, many restaurants don’t have enough cash to hand out at the end of the night because most transactions are conducted with credit cards and electronic payment methods. 

The solution is on-demand pay, also called early access to earned wages or earned wage access. These daily pay options allow employers to pay employees for hours worked and tips earned each day, complying with rules and regulations that require payouts within the pay period. Early access to earned wages is also an excellent way to boost recruitment and provide increased financial security for employees. 

How does earned wage access work? 

Earned wage access solutions implement pay cards and direct deposits to pay out employees based on a predetermined time frame set by the owner or manager responsible for paying employees. This solution allows for paying employees once or even multiple times during a day. 

Proliant’s ReadyPay Today pulls information from point of sale and other back office systems and automatically performs precise gross to net calculations in real-time based on an employee’s hours worked and/or tips allocated to them. This allows employers in the restaurant industry to facilitate cashless tipping in real-time without having to handle wads of cash or worry about compliance.

This system for early access to earned wages makes tip pooling easier by calculating pools based on hours worked by shift or day. They can also be calculated based on store sales (or type of sale such as non-alcohol) by shift or day. 

To learn more about ReadyPay Today, download this case study that details how our solution for early access to earned wages helped PepperJax with their tip payouts and more. 

About Proliant

Proliant puts the human in human resources. We provide a fully integrated, cloud-based HCM solution that simplifies payroll and HR processes. The company serves small to large clients in multiple industries in all 50 states and is committed to providing the highest quality customer service in the industry.

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