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Natalie Ladd Breaks Down the Pros and Cons of Pooling Tips

Natalie Ladd, a longtime server and writer, explores the phenomenon of shared tips.

Steven Depolo

For better or worse, we think of a tip as direct praise of our capable server — or a tacit chastisement of our inept waiter. But there are many complications involved in this divisive system, one of which is when restaurants share gratuities equally amongst front of house staff. Known as "pooling tips," this varies greatly in reasoning and execution. Unless the practice is fully disclosed at hiring time, or before a specific function or event, employees will be pissed; mutiny will result if it becomes a last minute "decide-and-announce" house surprise.

Here are some common tip pooling scenarios:

1) The establishment simply operates that way. In some places like resorts and country clubs, servers earn a flat hourly wage higher than server minimum wage. (How hard is that?) A "gratuity" or "service fee" (semantics matter as taxation laws for the house kick in on the latter) is added to each meal. That revenue gets tossed back to the house, or split evenly between everyone working that shift. I've also heard of that money being saved for a holiday party or an employee outing.

2) Catering and functions. When shopping for a wedding or event venue, the pricing proposal is broken down by room charge, meal and beverage cost, applicable taxes, and the service charge, which is typically a set percentage (15% - 22%) on all of the above. At the end of the event, the service charge is divided between the servers. That amount may or may not include the bar (Is it an open bar or a cash bar?) and a lesser set percentage (5% - 10%) may be taken off the top for bussers and food runners.

3) Slow shifts, tag-teaming by choice, or running short-handed. Servers may agree between themselves to pool and split tips if they trust each other's skills, or if the night is going to be a yawner. This also happens when working in an extreme team environment without table "ownership," where servers are running each other's food and drinks.

Considerations around these common scenarios (once again, communication and pre- shift/event expectations are key) are:

1) Are all servers staying until close? Should the person who's cut first get the same amount as the closer? Who's going to claim and pay taxes on the tips?

2) Are you pooling with a person who is or people who are as strong and efficient as you are?

3) An upside to pooling (which is the downside, as well) is you never know who's going to be in your audience. Rotating tables and even reservations are always the luck of the draw. I can have a great night where my section is full of drinkers and overeaters, while my colleagues have the water (with lemon, please) and appetizer people. My experience is it all comes out in the wash. In other words, the next shift it'll be my turn to randomly wait on the entree-splitters and decaf drinkers.

Much of what goes on in a restaurant depends on teamwork, and the most experienced and personable server in the world will not make decent tips without everyone pitching in. Few outside the industry understand the enormous amount of side work such as filling condiments, wiping glasses to a shine, and tending to the infinity of unseen details that lend themselves to good tips. It's all about the fine balance between being a server/independent contractor and a committed team player with appreciation for the house that feeds us.

Lastly, contrary to popular sentiment, I do not believe pooling is a widespread conspiracy to skim from servers to supplement the kitchen's payroll. However, I do know of an owner who would charge an 18% function service charge, and then distribute 15% evenly among the servers, keeping the rest for the house. If this was disclosed upfront to the guests (which it wasn't) it wouldn't have felt as sleazy.

Another owner would help himself to a cut of all credit card tips over a specific percent. The servers would receive their charge tips with their weekly paycheck instead of being paid out each evening (not a completely foreign practice) and, needless to say, there was a great deal of turnover. I have to hand it to this guy though. While I don't agree with the practice, there was no shame in his game as he straight up told server applicants that was his policy during the initial interview.

Pooling tips is a fuzzy one. As previously stated, there are just as many reasons for doing it as there are ways to execute it. Under the right circumstances, the buck doesn't always stop with your own server. And that isn't a bad thing.

NOTE: While meaningless to the diner, there are differences between the way tips/gratuity, "automatic gratuity," and service charges/fees are handled tax-wise. This is a confusing topic for another day.

—Natalie Ladd