So, how does this tipout thing work?
There are a couple of different ways it might work.
You might tipout a percentage of your total sales or you might tipout a percentage of your actual tips.
You might also tipout your bar a percentage of alcohol sales instead of a percentage of all sales. I even worked in a place where I tipped out the bar on all alcohol sales minus wine sales (we actually poured wine by the glass at the table and fetched our own wine out of the cellar).
You tip out by running a percentage of either your tips or your sales. Then, you take the amount of money that you get from the house, add in the amount of cash sales and subtract out any bank that you came to work with. Then you pay your coworkers with cash out of that. You then subtract it out of your claimed tips. If you have a TRAC sheet, there’ll be a spot for the various tipouts and you’ll subtract them, coming up with your actual take home tips, and this is what you declare. If you tip out on the computer, make sure you subtract them from your tips before declaring (you don’t want to over-declare. And there’s a weird case of some backwaiters also having to tip out the bar as well. If this is the case, and you tip out based on tips, it’s far to subtract the amount of their tipout to the bar before you calculate yourtipout to the bar. Otherwise, the bar will get double tipped on that amount of tips.
The most fair way to tip out backwaiters and the bar is based on your actual tips. This way everyone shares in the pain of bad tips and gets the benefit of really good tips. Plus, if a waiter gets stiffed by a table, they don’t have to “pay for waiting on that guest”. If you have to tip out based on sales, you should ask your manager if you can exclude the amount of sales covered by a stiff. This is really only fair for everyone. However, a server should never pretend that they got stiffed simply because they got cash on a credit card transaction. This is even more despicable than a guest stiffing a server. It’s a server stiffing his or her fellow co-workers. If you are currently tipping out on sales, you might broach the subject of changing it to tipping out on actual tips with the powers that be and explain how it’s fairer. BTW, generally speaking, 20% tipout on tips is about the same as around 3% – 4% of total sales depending on well you did percentage-wise.
If you want to grease your backwaiter, by all means, do do. Grease is extra money over and above the actual amount that you are supposed to pay. However, you can’t claim this as part of your tipout for tip reporting purposes. For instance, let’s say that you are supposed to tip your backwaiter 5% of your total sales and you had sales of $500. You tip them out $25 and then you give them an extra $3 because they rocked. You should still only claim $25 in tipout. That’s because that’s the amount that they’re going to claim. Technically, grease is a “gift”, an appreciation for a job well done, not payment for services rendered. In the case of an IRS audit, they’re going to wonder why you’re claiming $3 more than your backwaiter is. Sucks, doesn’t it? Yep. and most of the time, it won’t matter, but why take the chance? Basically, you should do the right thing anyway and we’ll be doing a post in the future on why you should claim every penny of your tips (hint- it’s the law!) I’m sure that will be popular with my fellow servers – ha!
The US Labor Department requires that all tipouts be “fair and customary”. This is fudging language. They don’t won’t to be in the business of dictating. what is“fair and customary”. Well, it’s probably not what you have to do, right? Nobody seems to think that tipout amounts are fair. Everyone wants it to be lower.
I’ve seen everything from about 10% of total tips all the way up to 45% of total tips. currently, I have to tip out 33% of my total tips, which some people would think is high. However, my last job required 7% of sales, which usually translated to between 40 and 45% of tips! I worked in a brewpub where we tipped the bartender 10% of total alcohol sales. In that particular restaurant, 10% of alcohol sales usually equated to about 1% of sales or 5% of tips, which is pretty standard these days for bar tipout. there are just certain percentages that correspond whether you are talking about tipping on sales or tipping on tips. They usually fall within a percentage point or two regardless of how the night went in terms of tip percentage (unless you either had a spectacularly good or spectacularly bad night).
Finally, why do I have to tip out the day bartender when he or she usually doesn’t have to make me any drinks (most people don’t drink alcohol at lunch tables). Well, dear friends, you are making it possible to even have a bartender available in case you do. Remember, most day bartenders aren’t going to make very many drinks even for their own guests. Don’t worry about the “fairness” of it, just do it. And do it gladly, you punk. Got it? Quit yer bitchin’.
If anyone has any specific questions about the topics that I covered, or if you’re new and still confused (and believe me, it can be a little bewildering and hard to explain to a newbie), feel free to ask your question in the comments section.
This concludes our overlong series on the subject of tipout.