Tip Handling in Toast
Toast provides a range of options to manage, track, and distribute employee tips. These options allow businesses to customize tip allocation processes according to their operational preferences, including handling tips from credit card transactions, cash, online orders, gratuity and service charges, and more.
Toast tracks and records all tips placed in our system. By default, Toast automatically associates tips with the employee who manages an order. Of course, there are options to move all or a portion of these tips to other employees as well. You can use different Toast tools to do this, whether you tip pool (with or without Toast Tips Manager), tip share, pay out tips in cash, pay out tips in payroll, or use alternative options such as a Toast Pay Card or paying through cash distribution apps.
Cash and Credit Card Tips
Cash tips are only tracked when employees report them during their shift review as declared tips. Cash tips are commonly paid out to employees at the end of each shift, but can also be incorporated into Toast Payroll where they appear on employee timesheets and are paid out as part of the business's pay cycle.
Credit card tips are credited to the business account. This means that restaurant daily deposits includes the employees' credit card tips and when they are distributed, the tip amounts are funded by the business rather than the guest themselves. Just like with cash tips, credit card tips can be distributed in cash or via payroll.
Online Ordering Tips
Tips from online orders can be managed in multiple ways:
By default, online ordering tips are deposited into the restaurant’s bank account. These tips can be distributed through a placeholder "online server," allowing flexibility for pooled tips to be allocated correctly. For Toast Tips Manager users, read Toast Tips Manager and Online Ordering to set up your tip pool with online ordering tips.
For catering orders, tips may flow into a placeholder employee account, enabling accurate redistribution. See the How do employees receive invoice-related tips? section of Get Help With Toast Catering and Events. If you use Toast Tips Manager, Set Up Toast Tips Manager for Catering and Events is for you.
If no designated server is assigned, tips may default to the server who closes the check, potentially causing discrepancies. Toast recommends assigning servers properly to ensure accurate tip management.
Gratuity and Service Charges
Service charges and mandatory gratuities are different things in Toast. In short, service charges are fees collected by a restaurant separate from the items a guest orders. On the other hand, mandatory gratuity is a special type of service charge that's ends up with an employee as non-tip wages. Mandatory gratuity is commonly paid out via payroll, but can also be paid in cash.
The option for businesses to retain service charges or pay them to employees offers flexibility to your business model. As an employer, you decide what service charges are delivered to an employee and which are kept by the restaurant as income.
Toast Tips Manager
Toast Tips Manager is Toast's solution for tip pooling and tip sharing. The module works best with Toast Payroll, but can be used without it as well. Toast Tips Manager has two main features: the tip pooling policy page where you can set up and enable your restaurant's own tip philosophy and the tip management report where you can quickly gather the results of your tip policy.
This product allows users to set a variety of options, so we recommend beginning with Plan Your Tip Pooling Policy where you can align your tip philosophy with the features of Toast Tips Manager to see how it can be best configured. Once you're ready to build out a policy and start tip pooling/sharing, Get Started With Toast Tips Manager will guide you through all the different options and settings. Use the Preview feature to predict your tip policy results even before you turn it on.
This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.