Advanced Tipping Tools That Increase Pay Visibility and Accessibility

Square cannot provide advice on tax issues. This article is for educational purposes and does not constitute legal or tax advice. For specific advice applicable to your business, please contact a professional.

Employers in any industry where tipping staff is widely accepted know the two biggest challenges of tipping are visibility and accessibility — in other words, tracking tips and getting them to your employees efficiently.

If your staff find your tip structure to be unclear, feel they aren’t receiving their fair share, or have to wait too long to access their earnings, your tip structure could have the opposite of its intended effect — making your top-performing team members feel less valued rather than more valued.

That’s not to mention the struggle as a business owner trying to juggle tip management manually and tie it into payroll smoothly without a system to help.

Here are four advanced tipping tools that help solve these pain points for business owners and staff.

Tip pooling

Tip pooling is becoming more common in coffee shops, bars, and restaurants to reward all team members who work on a customer’s order, including those who don’t interact with the customer as part of their role.

The accounting process for tip pooling can get tricky when it comes to allocating tips. For example, you may split tips by hours worked per day, or per shift. A restaurant with a bar may have two separate tip pools: one for bartenders and one for food servers.

Square Team Management is designed to simplify tip pooling by making it automatic. With Team Plus, you’re able to choose your pooling method: Split tips across all team members clocked in at the time of the transaction or across employees based on hours worked (by day or week). Select individual team members to be included in the pool, straight from your Square Dashboard.

The system will then automatically divide credit tips equally (using the method you’ve chosen) among eligible employees. When you visit your Square Dashboard, you’ll be able to view each team member’s shifts, their individual tips earned, and total tips.

Cash tip tracking

Credit card tips are more straightforward because they enter your POS right away, but tracking your employees’ cash tips can be a little harder to wrangle.

It’s not uncommon for coffee shops and small quick-service food businesses to place a jar on the counter to collect cash tips. At full-service restaurants, many diners still prefer to tip in cash. These dollars are difficult to pin down and calculate into your team members’ compensation when it comes time for payroll.

To make this easier, Square Payroll allows you to input cash tips manually. The system will calculate employee taxes for the appropriate tip amounts and withhold them from the employee’s paycheck. No advanced calculus needed.

Commission tracking

In industries where customers may not tip directly, commissions can be a very successful way to reward staff for providing revenue-boosting service, but they can be complicated for business owners to manage. Commissions must be accounted for as part of an employee’s income outside of their base pay.

With the commission tracking feature through Square Payroll, you can set commission rates (flat or tiered) for your employees, and the system will automatically calculate their earnings based on those rates. You can set separate commission rates for each team member to account for factors like seniority, and the employee assigned to the sale in your Square POS will receive commission (at their rate) from that sale.

When you import employee commission into your payroll processing through Square Payroll, you can easily have each person’s commissions paid out through their paycheck. Square Payroll also enables you to pull and view reports on commissions your employees have earned per item, per transaction, and more.

Early wage access

Waiting for the next pay period can be difficult, especially as the impact of the pandemic impacted cash flow for a majority of families. Many business owners would be willing to give valued employees access to some of their earned income before the next paycheck if it didn’t create such a huge accounting headache.

Square Payroll makes it a lot easier for business owners to offer this benefit to staff, with no impact to their own payroll and accounting process, through the On-Demand Pay feature.

On-Demand Pay allows eligible employees to access a portion of their earnings before the end of the pay period. When they clock out, they can simply go to their Square Team app (or the email summary of their hours) and choose how much of their earned wages they want to access early (up to $200). The money will be sent to Square Cash App, a linked debit card, or a supported direct deposit bank account.

The best part? This doesn’t change how you process payroll at all. Square Payroll automatically adjusts the employee’s earnings and accounts for this in the employee’s paycheck when you run your usual payroll. This gives your team members some control over their own cash flow without placing a burden on your business finances.

Tips should add value, not friction

Tips and commissions can act as motivators for employees to deliver a top-notch experience for your customers, but without a good tip management strategy, what should be a satisfying reward for your staff can become a source of aggravation for everyone.

Square Payroll and Square Team Management make the tipping process smoother for business owners and staff. Because these tools integrate straight into your POS, you don’t have to reconcile separate systems for your accounting, payroll, and reporting. When you can import, track, split, and pay out earned tips all from one centralized system, your tips take on the meaning they were meant to: acting as a satisfying reward to your team members for a job well done.

Want to get started with Square Payroll? Learn more here.