When dining out, we sometimes catch ourselves feeling confused when it’s time to pay for the bill. No, we’re not talking about paying for the price of the meal itself, instead it’s knowing what happens with the service charge and understanding how additional tips are split.
You’re not alone in this feelingーmost customers are thinking the same thing.
They’re thinking, “Why do I have to pay additional money for the service and what happens if I leave an additional tip?”
Now, as a restaurant owner, the more you ignore that question, the more your customers will feel that your restaurant is secretly ripping them off. And you don’t want them to feel that way.
To be a great restaurant owner, you must let your customers feel what they’re paying for by providing them excellent customer service. By doing so, they’ll be more than willing to pay for the service charge and even give additional tips to your servers.
What is a Service Charge?
A service charge is an additional fee that restaurants charge on top of the total bill. The purpose of a service charge is to cover various business expenses, but the common goal is to contribute to the staff’s salaries. If you think about it, it’s another way to enforce a standard tipping practice.
Most restaurants charge anywhere between 10%-15% of the total bill as a service charge.
In the Philippines, 100% of the total service charge collected is be distributed equally to all employees as per the updated labor code. This means management no longer gets a portion of tips, which they did before. Instead, tips are shared among everyone from the cleaning staff to the head chef.
What if a customer leaves tips beyond a service charge?
In most Southeast Asian countries, tipping is not mandatory. However, there are still people who want to reward their servers for providing excellent service. So, there’s no standard percentage for tipping, as it’s up to the customer’s discretion.
There are many ways to receive tips, including:
- Tips that are directly received from customers in cash.
- Tips from customers through electronic payment.
- Tips received by all employees and gathered in tip pools or other tip-sharing arrangements.
Customers willingly give tips when they’re satisfied with the customer service that your restaurant provides them. And when you have an efficient and fair tip distribution system, your employees will also feel satisfied, then be more willing to provide better service every day.
Essentially, the tipping cycle looks like this:
On the other hand, if you do not require your customers to pay a service charge and they leave tips, you should still implement a tip distribution system to uphold fairness with your employees.
How to split up tips for your employees?
There are many different ways to split additional tips between employees and the system being used depends on every restaurant. Unlike service charges, which must be distributed fully and equally and based on the employees actual hours or days of work, additional tips are not covered those guidelines.
Before you decide on what system you want to implement, you will want to consider the following:
- Number of employees
- Number of hours each employee works
Here are 3 ways to split tips between employees.
#1 – Sharing by Percentage
In this system, individual servers split a percentage of their total tips during their shift with their supporting staff. Usually, the manager sets the percentage amount for split tips between employees. As a general rule, those with a larger role in assisting the server receive the larger tip portions.
For example, say a server collected ₱1,000 in tips. To fairly distribute the tips between employees, you can follow and implement this breakdown:
- 10% to the kitchen – ₱100
- 8% to the bar – ₱80
- 5% to the busser – ₱50
- 3% to the hostess – ₱30
#2 – Tip Pooling
Tip pooling is a tip distribution method where all tips collected are collectively put into one large ‘pool’ and then redistributed among employees. This helps motivate employees by rewarding them for their services equally.
On the other hand, if you’re not carefully doing and regulating tip pooling, it can also be a source of dissatisfaction among employees. This is mainly because of unequal distribution. For example, a high-performing employee or an employee who worked longer hours can feel disgruntled if they go home with the same amount of tips compared to underperforming coworkers.
#3 – Sharing Based on Hours Worked
You can also distribute tips based on how many hours an employee spends working at the restaurant. With this kind of system, you only have to track and record the hours each employee spends working in a day or a week and then distribute tips in the ratios of the working hours.
This is how you can compute pooled tips based on hours worked:
Pool = (Tips / Total Hours of All Servers) x Hours per server
For example: Say you have a total of pooled tips of ₱7,000.00
- Employee A = 8-hour shift
- Employee B = 6-hour shift
- Employee C = 5-hour shift
And the total hours worked by all servers are = 19 hours
Now, you divide the total tips (₱7,000.00) by the total hours (19) and multiply that by each server’s hours:
- A: (7,000/19) x 8 = ₱2,947.37
- B: (7,000/19) x 6 = ₱2,210.53
- C: (7,000/19) x 5 = ₱1,842.10
What’s good with this type of tip distribution is that it creates a sense of fairness in an employee’s working time. Of course, you don’t want your part-time employees to receive the same amount of tips as full-time workers.
What are the benefits of splitting tips between employees?
When you compensate your employees for their work, they’re more likely to do an excellent job, resulting in better customer satisfaction, too. In addition, you want to boost the morale of your staff. That way your customers want to keep coming back to your restaurant, ultimately earning you a bigger monthly profit.
Here are 3 benefits of splitting tips between employees:
- Support servers: When you give the staff incentives for their work, you can expect more efficient front-of-house (FOH) and back-of-house (BOH) services.
- Show appreciation to BOH staff: Your restaurant cannot run without your BOH staff, who make all the food and drinks and expedite orders. Yet, they’re the ones who don’t get tips because they’re not customer-facing. So, splitting tips shows that your restaurant appreciates the BOH staff’s work.
- Encourage teamwork among staff: You can expect stronger employee teamwork by splitting tips. It incentivizes everyone to work together and help each other, especially during peak hours because if one is not doing well, it affects the whole team.
Digital Tipping Experience With Mosaic
Some restaurants, maybe including yours, still track tips and employee shifts on paper or complex spreadsheets. Manual tracking is labor-intensive and prone to human error, resulting in unfair tip distribution. Thankfully, there are digital tools explicitly designed to help restaurants streamline their operations—like Mosaic Solutions.
When you can provide customers with an alternative way to tip without giving cold cash, you can improve the customer experience and expect increased tips. With proper tracking and reporting, you assure your employees that you fairly distribute the tips received to each of them to incentivize upselling and boost employee performance. Also, it helps to increase the team moraleーand ultimately allows your restaurant to provide excellent service with every shift.
Manage your tips and employees in one single platform with Mosaic. Contact us today!