Tip pooling can play a big role in creating a great restaurant culture—and it doesn’t have to be complicated.

It started during the COVID-19 pandemic—and it’s still happening. Attracting and retaining employees has become a bigger challenge for many restaurants as labor shortages remain a stubborn issue around the country. In fact, the restaurant industry is still down 750,000 jobs from pre-pandemic levels, according to the National Restaurant Association.

“A lot of folks started leaving the restaurant industry during the pandemic for a variety of reasons, often centered around pay and benefits,” says Jordan Boesch, founder and CEO of 7shifts, a restaurant team management solution

A recent survey from 7shifts asked nearly 4,000 former restaurant workers why they left the industry during the pandemic. The results were clear—workers under the age of 25 called out wages, schedule flexibility, and school as their top three reasons. Those above the age of 25 agreed that wages and schedule flexibility were the most crucial, with manager recognition replacing school in this age group as a close third. 

“Workers want flexibility, better pay, more recognition, and career path opportunities,” Boesch says. “And restaurants have struggled to adapt and meet workers halfway in terms of some of their needs. We’re in an interesting phase where we’re starting to see some restaurant operators changing how they do business—and these operators are not only attracting workers; they’re attracting a lot of them.”

Brands like &pizza and Union Square Hospitality Group have been able to draw in top performers by focusing on building a meaningful culture. “These successful brands have really well-defined core values and behaviors they champion,” Boesch says. “Every organization has a culture, and if you are not intentional about building it, then it’s going to take its own form. When you think about why so many people in the restaurant industry are quitting, culture is at the foundation of everything. In order for brands to thrive, they need a great team culture.”

Restaurant work has always been a team sport. Today’s top brands are those that have invested in their teams. “It’s really important, at this moment, for employers to look at how they’ve been running their restaurants and building their teams,” Boesch says. “We’re seeing a really big shift in terms of companies beginning to focus more intentionally on building great teams.”

Raising pay and benefits shows respect and understanding, which is an important first step in attracting the best employees—but it may not be enough to retain them. It’s important to give attention to each layer of employee concerns, from wages and schedule flexibility to recognition and career development. “To see results, you can’t focus on just one of those things—you have to do them all,” Boesch says.

The practice of tip pooling cuts across a handful of these concerns. Tip pooling contributes to the overall sense of shared effort, helps boost wages, and is seen as a more equitable way to distribute tips—all ways to reinforce a brand’s culture and solidify it as an employer of choice. The practice saw a big resurgence during the worst days of the pandemic. During lockdowns, many customers became more generous with tipping in general, and restaurants sought to spread this around and encourage employees to return. Many, if not all, foodservice establishments have held onto tip pooling since then as a way to retain staff.

In the past, the practice was often limited to the front of the house, but that mindset is changing in many areas. “We’re seeing a lot of restaurants do tip pooling in an equal manner across the board,” Boesch says. “Some folks are getting creative in terms of how they tip the back of the house as well, because they’re part of the team. Making sure that you have an equitable tipping structure that encompasses all parts of your restaurant is what we’re seeing now as the winning formula.”

Mutual trust is critical to a strong brand culture, and when done properly, tip pooling can help establish that—among employees themselves as well as between employees and management. Restaurants should communicate openly and regularly about why tip pooling is important. When employees understand the brand wants to ensure everyone’s financial wellbeing, Boesch says, the culture improves.

Tip pooling benefits the entire team, but managers may not always see it in such a positive light. Distributing tips in general can be challenging, let alone calculating so many payouts and staying mindful of changing local and federal regulations. 7shifts recently found that restaurant managers spend about eight hours per week running calculations and paying out tip pools, including taking ad hoc trips to the bank. With fewer customers paying in cash these days, managers may find themselves returning to the bank more often. Employees may not get timely cashouts in these scenarios, either, and may even see it as an incentive to move on.

“This whole system of tipping is a good thing to do, and it helps everyone get an equitable piece of the pie they’re all working so hard toward—but a lot of labor hours are needed to make it happen,” Boesch says.

Tip pooling is one of the time-intensive challenges that 7shifts set out to crack for restaurant operators and managers. 7shifts created an automated solution that can make complicated tip pooling calculations, generate reports, and get employees paid. Restaurant managers can hand these tasks off to 7shifts with a few clicks and save those eight hours per week of labor.

“We tried to solve these significant pain points around tip pooling for our operators,” Boesch says. “7shifts is a restaurant team management solution, which means we tie together everything from the moment the worker is hired—training, scheduling, payment, and retention. With tip pooling, we automate a lot of the calculations that are pulled from various point of sale systems or our time and attendance product. We help remove a lot of costly human errors and help operators avoid compliance issues.”

Employees check their 7shifts mobile app to trade shifts and communicate with other team members. The app becomes an easy place they can return to get an extra layer of visibility into their tips. They can also use it to send their tips directly to the bank account of their choice. “Whether you’re an operator or an employee, a team management platform like 7shifts has a lot of benefits when it comes to how your team operates,” Boesch says. “And you don’t have to use multiple pieces of software. It can be as simple as one platform that handles every step, from hiring to paying to retaining, for you.”

To learn more about tip pooling and tipping best practices, visit the 7shifts Tip Jar.

By Kara Phelps

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