How to Calculate Tip Pooling: A Simple Guide for Restaurant Managers

My restaurant is a pizzeria, and it is a delivery and carryout only operation. Many of our customers will leave a tip, either when placing an order online or when picking up and paying in person. For deliveries, it's clear and easy for us - our drivers (or if we delegate an order to a 3rd party delivery provider - their drivers) receive 100% of the tip for those orders. However, it becomes a more difficult challenge for us when we receive a tip for a carryout order - as everyone in our store is generally pitching in together to ensure we send out the right products with the right quality at the right time.

Enter tip pooling. Tip pooling matters as it helps foster teamwork and a sense of fairness in our store, keeps us compliant. This guide will cover who can generally be included in a tip pool (and who can not), some common tip pooling methods, an example of how to calculate the distributions, how to handle credit card vs. cash tips given, and some common mistakes to avoid. If you're trying to decide whether tip pooling is right for you, check out our guide on tip outs vs. tip pooling.

Who Can Participate in a Tip Pool?

While I am not offering any legal advice here - and advise you to speak to your attorney regarding the rules in your jurisdiction, in general I believe it unethical and often illegal for managers and owners to participate in a tip pool. Now - whether or not your back of house (kitchen crew, dishwashers, etc.) is able to participate in your pool is going to vary by the laws of your jurisdiction. In most cases, if you are claiming a tip credit for your front of house staff (e.g. you pay them BELOW federal minimum wage and let tips make up the difference), your back of house staff will be unable to participate in the pool - but again, check the laws in your specific location as this may vary. Now, if you are like us and pay every role in your store the full minimum wage (or better), then your back of house is likely able to participate in the tip pool as well. State laws vary on this point, though in Indiana at the time of this writing, federal law applies and as such our back of house employees do participate.

Common Tip Pooling Methods

There are a few common methods to calculate your tip pool. The simplest is an equal split, meaning everyone working gets the same amount. Now, this can work well if everyone is generally putting in equal effort and / or time each shift.

If not, you'll likely want to implement a weighting system. One way to do this is to make it based on hours worked. As an example, assuming 50 hours were worked on a shift and $100 of tips were received - each hour worked would be worth $2 of the tip pool. This works well when every role participates evenly.

In some situations though, you'll want to implement a weighting strategy, where different roles get different weights. One way to do this is to allocate a % of an employee's hours that should count toward the tip pool claim.

See the following example for how this would work, assuming the same 50 hours were worked and $100 of tips needed distributed, but with differing weights of tip pool share accruals:

While 50 hours were worked, the tip pool will be divided up among (10+5+8+10+2) or 35 hours. Therefore, each credited hour is now worth $2.86 (rounded up here - you'd only want to distribute out penny-perfect to the pool collected). The same $100 is distributed, but Employee A would receive 10 × $2.86 = $28.60, while Employee E would receive 2 × $2.86 = $5.72 - quite the difference from an equal distribution where everyone would receive $20. I generally believe that tips should be pooled and the distribution calculated daily, though some places do this on a weekly basis. Want to see this math in action? Try our free tip pool calculator to experiment with different hours and weights.

Cash Tips vs. Credit Card Tips

Now there are some nuances to consider. Cash tips vs. credit card tips. Some restaurants will payout cash tips daily, though this creates more work for managers as someone has to count, calculate and divide that cash every night. In our store, we deposit the cash tips that go to the pool and include them in the calculation of what needs to be distributed. We currently pay tips earned on employees paychecks, though some places allow employees to access their tip earnings more frequently and off cycle - reporting them on their paychecks as cash tips already received (important as this ensures taxes are properly paid).

Common Mistakes

You want to avoid some common errors many restaurant owners make. Don't include ineligible employees in your pool (and regardless of your jurisdiction, I believe no owner should ever take a pooled tip in any scenario - if you are waiting tables directly, if you are delivering orders directly - that's different, but the pool is for your team). You must document your policy and train your managers on how it works, and you must ensure your policy is consistently followed on EVERY shift, policies applied inconsistently will eventually cause you problems.

Now we use AnchOps to automate tip calculations (frankly, this is why I built AnchOps). Busy owners and managers need to be focused on growing their business, innovating their offerings, and better serving customers - not wasting time calculating tip distributions.

Wrapping Up

To recap: make sure you have your policy clearly documented, have a qualified attorney review it for legal compliance, and make it available to your employees. Ensure that your managers and team are trained on how your tip distribution works and that it's applied consistently every shift. Before you distribute pooled tips, you may also need to account for credit card processing fees — here's how to handle that legally. Tip costs are just one piece of the puzzle—make sure you're also tracking your overall labor costs daily. For more on controlling labor expenses, see our guide on scheduling mistakes that cost restaurants money. And if you're on Toast POS, here's how to automate your tip pool calculations entirely. If you're using First Delivery for hybrid in-house and third-party delivery, tip pooling gets more complex — here's how to handle delivery driver tips with First Delivery and Toast.