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Tips in Hotel & Restaurant : Ultimate Guide (Part-2)

July 7, 2014

In the previous post, we have shared information on tips in hotel and restaurant. In this post we will share some more information on how to provide tips in hotel and restaurant.

How to Report Tips

Every service associate has to report tip since it is considered as a part of a server’s salary to the following section:


  • Internal Revenue Service 
  • Restaurant manager
  • Social Security
  • Medicare taxes

An employer is required to report 8 percent tips (which are calculated after dividing the total sales check amount by the number of guests served) for each server in an establishment.

According to federal law, all tips count as taxable income. If any server earns $20 or more in tips through credit card, cash or receive tip indirectly in any one month then he/she must report the amount to his/her employer in writing. The report is to be filled by the tenth day of the month following the month when the server has earned the tips.

Tips report includes the following details of the server:

  • Name
  • Address of the server
  • Social Security number
  • The total amount of tips received during that period

Keeping a record of daily tips also could be a wise idea in proving the total tips earned in case of an audit.

Modern Tip Policy

tipping hotel restaurantTips policy has been modified and personalized due to certain drawbacks of this system. For example: the basic pay of the servers is reduced since the manager thought that the waiter or waitresses got enough by the way of tips, hence, the waiters or the service staffs treat the customers according to their paying capacity which gradually weaken the service policy of the service staffs.

In order to establish an improved tipping system, a new system of tipping is being introduced “Point System”. Point system is to allot certain numbers of points to all service personnel of particular section of F & B per week on the basis of their rank, experience and skills of the person, for instance, the highest numbers of points are allotted to the top person in the department and the least number of point is allotted for the lowest ranked person. Under this system, the tips received in the department are deposited in a sealed and locked box daily by all the responsible persons and at the end of each week the amount collected in the box is totaled up.

And the amount is then divided by the total number of points in the department to determine the point value. After that the point value is calculated and distributed every week for each service personnel in the department.

Example

If the total amount collected during a particular week is Rs, 30,000/- then the total number of points in the department are 300. Then the value of each pointy will amount to 30,000 divided by 300=Rs. 100.

Under this point system, all the kitchen staffs are allotted a marginal share.

Though this point system is being introduced due to certain disadvantages of previous tipping system, but point system has also some advantages and disadvantages which are as follows:

Advantages of point system

  • Point system ensure regular attendance of the service staffs.
  • This system reduces absenteeism to the minimum.
  • Unlike tipping system, point system is considered as an accounted system since the amount of this income is distributed among the servers.

Disadvantages of point system

  • Sometimes the service associates can show dishonesty in depositing the complete amount of tips collected by each time.
  • Point system often create the mistrust among the service staffs.
  • Flicking of tips may lead bad relation among the service associates which affect the overall work performance.
  • Under this point system, the proficiency of a skilled worker is not always valued fairly.

Group Polling

Apart from point system, another easy tipping system is group polling. Group Polling system allow the waiters of adjacent work station to group together and pool together the tip amount they received and distribute it equally among themselves at the end of each working day. There is a less possibility of flicking of the tip money is not frequent since each acts as a check on other. Sharing of tips ensures better team spirits and helps to build competitive attitudes which in turn increases the work efficiency among the staffs.

However, no matter what kind of tipping system one adopts or applies in his sector, each system has its own drawback, hence, some establishments especially some hotel sectors have completely banned tipping from their policy and made it illegal to give or receive tips which necessities the adoption or introduction of a new system “Service Charge”.

Why Service Charge is being Introduced

service charge hotel restaurantService charge is a separate charge which is accounted to the customer and is included in the bill and collected from the guest. Service charge usually ranges from 12% to 15% of the total bill amount. From this amount a fixed percentage is given to each staff member according to his/her status, weekly, fortnightly or monthly basis. Apart from the staff’s percentage, a certain percentage is also allocated for the following purposes:

  • Staff Welfare
  • Breakages
  • Other staffs beside waiting staff

Service charge ensures the efficiency and professionalism of the service. They do not serve the guests on the basis of their financial capability due to demolition of tipping system. In order to make this system efficacious, receiving tips should be declared and considered as a major misconduct and the hotel menus and guest bills should clearly state that no tips are to be paid and allowed as service charges are in included in the bill.

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