Tips not connected to a delivery order are considered insider tips. Insider tips are increasing and provide franchisees with a new opportunity to reward inside employees when tips are pooled and allocated. However, this opportunity can create increased risks if handled improperly. There are multiple ways to pool tips and specific laws that impact who receives tips.

If you are not planning to pool tips, confirm that all car-side delivery orders are assigned to a specific employee. There are legal considerations if a manager or supervisor is assigned the order and receives a tip. Also, you should turn off tipping for carry-out or drive-thru orders. This will prevent a store from receiving tips that are not assigned to a specific team member.

If you are considering pooling tips, there are two parts to the decision: 1) what tips are included? and 2) which employees will participate?

Pooled tips come from customer orders that are not assigned to an individual employee.

The following are two ways to increase the size of the tip pool:

  1. Assign car-side orders to a predetermined pool
  2. Allow customers to tip drive-thru and carry-out orders and assign the drawer

Once the tip pool is established, you must determine which employees will participate. The employees participating should be clearly defined based on their positions in Pulse and each position should have defined responsibilities documented. The goal is to exclude employees with manager or supervisor responsibilities.

Through HORNE’s payroll services, we have a tool that allocates tips to the appropriate employees each pay period. The employees are paid an allocated portion of tips based on hours worked during the period. Allowing Inside staff to receive tips can be a useful recruiting tool and may reduce turnover.

HORNE recommends a clear policy to mitigate the risk of mishandling insider tips. Regarding the laws, it is important for franchisees to receive advice from legal or human resource professionals regarding federal, state, and local laws.

Reach out to your Relationship Manager to learn more about ways to handle insider tips