The History Of Restaurant Employee Tip Handling

No one knows when tipping began. But we do know that in the 1980’s the IRS levied new regulations on restaurant owners to track the tips received by the employees of the restaurant.

The magic number of 8% became the benchmark for servers and waiters to declare as their tipped earned. Not because it was accurate. Rather, because it was the minimum amount allowed by the IRS.

The trick is this. Tipped employees in restaurants are generally not paid minimum wage. The amount varies from state to state but it runs between $2.15 to $3.15 per hour. The IRS assumes that the tips received will make up the difference between this low hourly amount and the true minimum wage that is currently $5.15 per hour. If this is not the case, then it is up to the restaurant owner to make up the difference between what the tipped employee earned + declared tips and minimum wage. This makes accurate tip declaration, tracking and reporting a vital aspect of running a restaurant.

The Need For Restaurant Employee Tip Handling

You need a employee time clock system that recognizes tipped employees, tracks their individual sales, any charge tips collected and requires them to declare cash tips at the end of their shift.

You also need a employee time clock system that can handle tip sharing, tip pooling and tip out to bus help, bartenders and other servers.

You need a employee time clock system that will track the hours worked and tips collected and recognize problems with employees not declaring enough tips to meet the minimum wage requirements.

The Solution Of Restaurant Employee Tip Handling

Some point of sale software products have tip tracking built into their time in attendance module. Once you set an employee as a tipped employee the system will require tip declaration prior to clock out.

Servers and waiters who ring sales will have their total sales tracked. Tips collected through credit card sales are tracked and shown on the server closeout report. Prior to clock out the server/waiter will be shown their total sales, the charge tips collected and then asked to declare their cash tips.

Some point of sale products do allow for programming flexibility with this feature:

You may change the minimum declaration from the default of 8%.
You may change the requirement to declare tips at clock out.
You may opt to have the system print a chit with their tips shown.
You may opt to not show charge tips on the declaration screen.

The Benefit Of Restaurant Employee Tip Handling To You

How do you measure the amount of relief a person can have knowing that your point of sale system is enforcing tip regulations levied by the IRS? Not to mention the mass amount of time savings in tracking declared tips, charge tips and hour worked for every tipped employee.

This is one headache you don’t want to have to deal with. If you have tipped employees you need a good point of sale system with tip tracking and time and attendance.

About the Author

Jerry D. Wilson is Director of Internet Sales for DirecTouch Restaurant Point of Sale. With over 25 years of hospitality point of sale experience, he has written several articles explaining the benefits of touch screen and retail point of sale software. Please visit DirecTouch Do It Yourself Restaurant Point of Sale or DirectRetail Do It Yourself Retail Point of Sale for more information.

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I was out for a quick afternoon snack and stopped by a local Jack In The Box. I looked over the items and pulled up to the microphone to place my order. I was greeted, “Welcome to the world’s best Jack In The Box. How may I help you?”

I laughed at the greeting. Had I somehow stumbled on what was indeed the best Jack In The Box restaurant in the world? Or had I stopped in at a fast-food restaurant, which thought of itself as the embodiment of the world’s best Jack In The Box? Or, had I (which was most likely) simply chanced upon a very sarcastic employee? Over the microphone and speaker communications system, you would think that sarcasm would be easy to detect, and yet I was coming up with zero indicators. I would have to wait for a face-to-face meeting to decide on the intent of the greeting.

I pulled up to the service window. A friendly face took my money, gave out my order, and wished me a good day. There was no sarcasm. There was only efficiency and a genuine friendliness. He name was Carmen.

As I drove away I promised myself to send an email to corporate headquarters of Jack In The Box. I did, and received a standard reply thanking me for my comments, which they promised to pass along to the restaurant. I never heard any more. I’ve gone to other Jack In The Box restaurants, and they’ve presented no claim of being the best in the world, so I’m left with the feeling that perhaps this was the best in the world.

It’s not often that I visit this particular restaurant, but I have several times since the initial incident. One time I got the same clerk and was charmed again by her delivery. At other times I was greeted by friendly people, but without the belief that this was indeed the World’s Best Jack In The Box. I stopped by recently and was charmed by another clerk. He didn’t use the same phrasing, but from his voice there was an element of belief.

I think what I experienced was a moment in time when this was indeed the World’s Best Jack In The Box . . . and perhaps it still is each time Carmen is present. I don’t know that my accolades were ever passed along, but in a world of customer service complaints I hope that she received my complimentary comments. Encouragement is sometimes everything for front-line service workers.

There is a glimmer of hope that Carmen had a hand in training and passed along her enthusiasm and her passion to her fellow workers that she somehow worked for The World’s Best Jack In The Box, and they do, too.

I think we should all have the belief that we work with the best people and provide the best service and best products in the best organization for the best industry in the world, and we should share those beliefs and feelings with our fellow employees . . . as well as our customers.

Author Don Doman: Don is a published author of books for small business, corporate video producer, and owner of Ideas and Training (http://www.ideasandtraining.com), which provides business training products. Don also owns Human Resources Radio (http://www.humanresourcesradio.com), which provides business training programs and previews 24-hours a day.

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As a specialist in getting restaurants open, it is surprising how many people ask, “How can I get out of my restaurant?” Reasons for this question vary greatly, from a death in the family to a merger with another firm, to the end of a lease.

Selling your restaurant requires quality prior planning if you are going to realize the maximum value for the business. This planning is not much different when getting out than when you first got into that business.

What things did you look for when you bought your restaurant? Of course, profit was probably the key consideration, followed by a great location, a niche market, a solid system of operations, and a vision for growth. Aren’t these the same things you need to concentrate on if you are going to market your operation to someone else?

A strong focus on the basics, about twelve months prior to getting out of your operation can take you from where you are at now, to a maximum market value. Let’s look at some of the top areas you may wish to concentrate on right away:

1. Bookkeeping. A clean, organized and understandable set of financials are critical to the sale. A close friend once said, “A business with no profits on paper has no value”, and this statement is close to being very true. You will want to show where your income came from, what you spent on expenses, and what kind of cash flow exists. If you cannot show these numbers, all the profit in the world will not make any difference to a buyer if you cannot prove it. A professional accounting firm can give you feedback on how to structure your systems.

2. Profits. You simply must be profitable and there are ways to do it. By concentrating on your highest cost areas such as labor, food and beverage, you can make good headway by making your purchasing more efficient, watching your inventory levels, and what you are charging for your products. Obviously profit generation is a very large topic and worth looking at closely. Have you had an operations analysis done on your business recently? A restaurant consultant can conduct this analysis inexpensively and give you a list of things to work on.

3. Location. This includes making sure you have a lease that is of value to your prospective buyer, or terms on the real estate that will provide enough profit for the buyer at the end of each month. Imagine the interest level of a buyer who finds out that you have only 4 months left on the lease. Hard to get too excited about that, especially when most states require certain minimums on the lease terms if you are selling a liquor-beer-wine operation.

4. Appearance. Just like a home that needs “Street appeal” to get buyer interest, your restaurant is the same way. Fresh paint, neat landscaping, clean windows, an organized office, a clean kitchenyou get the idea. Put a checklist together of what you will get done each month, and by month twelve, you will have completed the list.

5. Legal. If you operate as a corporation, would you consider selling the stock in your corporation to the buyer, allowing you to simply walk away? For some sellers, this option may make sense. Seek the services of a qualified attorney on how best to structure your business for a future sale. While one structure may work for one type of operation, it could spell financial disaster to another. This is a good time to seek professional legal advice.

6. Staffing. If you have been running the operation on your own, doing a lot of the work yourself, are you simply selling a “Job” to the new buyer? Think about what your buyer will be looking for and set up your systems now for maximum value in the near future. You will want to hand over a smooth running, fully staffed, profitable operation to a buyer. Now, what the buyer will do will be anyone’s guess!

So far, we have concentrated on a twelve-month exit plan. What if you need to get out of your restaurant quickly, like thirty or sixty days from now? If your need is that pressing to get out of a business, you will undoubtedly have your reasons for this pressure. An immediate lack of profit, a terminated lease, costly repair problems or something else is triggering this pressure.

You will be hard pressed to realize the maximum price for your business if you are a desperate seller. It makes sense at this time to enlist professional services of a restaurant consultant to walk you through your options, and how you can get the maximum value out of the operation.

Should you simply hand over the business sale to a realtor or broker to sell? Not right away if you want the maximum long-term value. Prior planning, a vision for what type of transaction will best serve your purposes, and consulting advice on how to squeeze every last dollar out of that operation are all critical components of getting your just rewards.

Kevin Moll is a noted author and President of Restaurant Consultants, Inc. Specializing in restaurant startup ventures and troubleshooting, his services are available worldwide. He can be reached at 1-800-961-6005 or through the Internet at http://www.restaurantconsultant.org

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