Tip pooling is legal under federal law, and it's one of the easiest places for a restaurant to break the law without meaning to. The rules fit on a page. What trips people up is that there are really two sets of them, and which one applies depends on a decision you made long before anyone split a tip: whether you take a tip credit.
What a tip pool is, and how it differs from tip sharing
A tip pool gathers the tips from a group — often every server, bartender and busser on a shift — and divides them by a formula. Tip sharing, or tipping out, runs the other way: each server keeps their own tips and passes a share to the people who helped earn them, usually a set percentage.
When you require either one, the same federal rules apply. They set no limit on how much of their tips an employee can be required to put in. What they limit is who's allowed to take out.
The rule for every employer
Whether or not you take a tip credit, you can't keep your employees' tips, and you can't let managers or supervisors keep any of them. The law puts it in one sentence: an employer "may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees' tips, regardless of whether or not the employer takes a tip credit."
Tips collected for a pool also have to be paid out in full, no later than the regular payday for the pay period in which they were earned.
If you take a tip credit
Federal law lets you pay a tipped employee a cash wage as low as $2.13 an hour and count up to $5.12 an hour of their tips toward the $7.25 minimum wage. If you do that, a required pool can include only employees who customarily and regularly receive tips. The Labor Department's examples are servers, bussers, service bartenders and counter staff who serve customers, and its current test is whether a job involves service-related work and enough contact with the customers who leave the tips.
Cooks and dishwashers can't be in that pool, and neither can anyone else whose job doesn't customarily earn tips.
If you pay the full minimum wage
If you pay your tipped employees the full minimum wage in cash and take no tip credit, the pool can also include cooks, dishwashers and other back-of-house staff. That's the federal answer to whether a dishwasher can get tips: yes, if you give up the tip credit.
Check your state before you rely on either route:
- Seven states don't allow a tip credit at all — Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington — so tipped employees there are already paid the full state minimum wage before tips.
- Some states restrict pools further. Massachusetts limits tip pools to wait staff, service employees and service bartenders even when you pay full wages, and Minnesota doesn't let employers require employees to share their tips at all.
- Tipped wages are moving. Michigan kept its tip credit but raises the tipped wage, as a share of the minimum wage, every year through 2031, and Washington, DC rewrote its phase-out in a way that keeps a tip credit.
Where managers stand
A manager or supervisor can't receive tips from a pool — not a share, not a cut, and not on a night they spend working the floor. The Labor Department's own example is a manager who "may not receive any tips from the tip pool, including when he works a shift as a bartender."
Who counts is decided by duties, not by job title or salary. Someone is a manager or supervisor for this rule if their main job is managing the business or a department, they regularly direct the work of at least two full-time employees or the equivalent, and they can hire and fire, or their recommendations on it carry particular weight. An owner with at least a 20% stake who actively manages the business counts too.
What managers can do:
- Keep tips they receive directly for service they directly and solely provide. The Labor Department's examples are a pizza-parlor supervisor who delivers a pizza and is tipped for it, and a salon manager who keeps the tips from clients whose hair she styles herself.
- Put tips in. You can require managers who earn their own tips to contribute part of them to a pool for the rest of the staff.
Getting this wrong is expensive. An employer that keeps tips owes back every tip kept and any tip credit taken, plus the same amount again in damages, and can face a civil penalty of up to $1,409 per violation.
How to split a tip pool
A Friday dinner puts $1,200 in the pool. Three servers work 6 hours each, two bussers work 5, and one bartender works 7.
By hours worked. That's 35 hours, so each hour is worth about $34.29:
- Each server: $205.71
- Each busser: $171.43
- The bartender: $240.00
By points. Weight each role by how directly it earns tips — say, 1 point an hour for servers and the bartender, and half a point for bussers. That's 30 points, worth $40 each:
- Each server: $240
- Each busser: $100
- The bartender: $280
Neither method is more correct. What matters is that the formula is written down, applied the same way every shift, and visible to the people it pays — which is also what you'll need to show if anyone ever questions it.
What to write down
- Whether you take a tip credit, because it decides who's allowed in.
- Which roles are in the pool, and why.
- The formula, and how hours or points are counted.
- When tips are paid out: no later than the regular payday.
- A record for every shift: what went in, and what each person took out.
For their own tax reporting, employees who share tips report only the tips they actually keep.
Salons follow the same rules
Nothing here is specific to restaurants. A salon that shares tips with shampoo assistants or front-desk staff is running a tip pool, with the same two routes. A shampoo assistant who works directly with clients is the clearer case for a pool under a tip credit; whether front-desk staff qualify is unsettled. A salon that pays the full minimum wage and takes no tip credit can include them either way.
Any fair split starts with knowing who earned what. In Sonorch, every ticket line belongs to the person who performed it, so a salon's tips are split at the moment of sale instead of being reconstructed at the end of the week — adding your team shows how that's set up.
Service charges are a separate matter entirely. They're wages, not tips, so none of these rules decide where they go; service charge vs tip explains the difference.
This is general information, not legal advice. Tip rules vary by state and city, so check yours before you set up or change a pool.