Tips, tip pools and service charges: who gets what

The word printed on the customer's check does not decide whose money it is. A line reading "gratuity" on a party of ten is very often not a tip at all in the way payroll treats it, and the guest who wrote nothing on the tip line may still believe they took care of you.

What decides it is whether the customer chose the amount. A charge the house adds automatically is, in most arrangements, revenue belonging to the business, and what reaches you from it is a pay policy. The two look identical on the receipt and land in different places on your stub.

This describes the mechanics and what to check, not what you are owed. Tipped-wage rules vary sharply by state and city, and entitlement questions belong with your state labor department.

Two kinds of money that look alike

A voluntary tip generally belongs to the employee, with pooling rules differing by jurisdiction.

An automatic charge, whatever the menu calls it, is usually handled as business revenue first. When the business passes some along, it commonly reaches you as a commission, bonus or other wage line rather than a tip line, and may be treated differently for overtime and reporting.

Terms to watch: service charge, administrative fee, large party charge, event fee, kitchen appreciation fee, delivery fee. None are self-explaining; ask which bucket each is in.

How a service charge reaches your stub

Ask your employer, in writing, three things about every automatic charge: what portion is distributed, to which positions, and on what pay line it appears. Answers vary by house, and one restaurant may treat a banquet charge and a large-party charge differently.

Then look for that named earnings line on the stub. Money that appears only as an unexplained lump is money you cannot check.

Tip pools and who is in them

A tip pool collects tips and redistributes them by a formula. A tip-out is the narrower version: a fixed portion of your sales or tips passed to support positions at shift end.

Get the formula in writing: which positions contribute, which receive, whether it runs on sales or on tips received, and who calculates it. A pool run on a share of sales and one run on a share of tips behave very differently on a slow night.

Who may participate is heavily regulated and varies by state and by whether the employer takes a tip credit. If a manager or supervisor is in your pool, that is a question for your state labor department, not the group chat.

Tip credit, and the two rates on a stub

Some jurisdictions let an employer count a portion of your tips toward its wage obligation, producing a lower cash wage line plus a tip credit. Others require the full applicable minimum in cash before tips, and several cities set rules on top of their state's.

Where a credit is used, a stub typically shows a cash wage line at one rate and a separate line for the credit, with notice requirements and shortfall mechanics that differ by jurisdiction. Whether your employer may take one at all is a state and city question.

Overtime on tipped work is not computed from the cash wage line alone, and how the regular rate gets built varies. That is why the arithmetic on a tipped stub is worth checking rather than assuming.

What a tipped stub should show

Go line by line on the next stub. If a category applies to you and has no line, ask payroll.

• Hours worked in the period, and the cash wage rate actually paid for them.
• A separate line for each rate, if you work more than one position or a dual rate.
• A tip credit line, named as such, if your employer takes one.
• Charged tips for the period, as their own earnings line.
• Cash tips reported, separately from charged tips.
• Tip-out or tip pool amounts, in or out, with a sign you can read.
• Any deduction taken against tips, such as card processing, permitted in some states and not others.
• Service charge distributions, on whatever line your employer uses, named clearly enough to identify.
• Overtime hours on their own line, with the rate visible.
• Year-to-date columns, which are how you catch a correction that never landed.

When it does not reconcile

Compare three things for one pay period: your own shift notes, the point-of-sale tip totals for those shifts, and the stub.

Put any gap in writing to payroll with dates and your own figures. A written question gets a written answer, and that is a record.

Your stub is the only version of the shift that outlives your memory of it. Read it while you still remember the night.

Two restaurants, two sets of rules

Almost all of it varies. Tip credit, pool composition, deductions against tips, how service charges are classified and what a stub must show come from a mix of federal rules, state law and, in some cities, local ordinances. Two restaurants an hour apart can run different formulas, which makes the break room the worst source available.

Start with your state labor department, which publishes the rules for tipped work and takes wage complaints. Under a union contract the formula may sit in the contract. Before acting, talk to an employment attorney.