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How to Manage Tips for Your Employees Without Using Cash


Calculating and distributing tips can be a major headache for managers and business owners. By using a tip-to-card option, businesses can minimize administrative costs, avoid costly errors, help keep employees safe and happy, and free up managers to oversee more important aspects of operating the business.

What is a tip-to-card product?

A relatively new offering in the payroll landscape, tip-to-card solutions offer a comprehensive tracking and distribution system that takes the guesswork out of managing tips across an organization. Most platforms can integrate with the store’s existing point of sale system and can track tips, calculate tip distributions, and disburse the tips electronically to a paycard. Some systems can also track mileage reimbursement, deduct administrative fees, perform the payout via ACH to an employee’s existing bank account, and will even float the tip funds for two business days before collecting the disbursed funds from the employer.

Managers can view a history of tip earnings and payouts by employee, record tip information for each employee, and run a variety of daily business operations reports. Some systems will also allow the employees to have their own view where they can see a history of tip earnings and payments, see how any tip distributions were calculated, change their profile data, and change how they are notified of their tip distributions (i.e. text or email notifications).

Benefits for employees

Tip-to-card solutions offer a variety of benefits designed to keep employees safe, efficient, and happy. While employees love to make plenty of tips, carrying around a large bundle of cash can be risky. Instead, employees can load their tips onto a paycard or choose to have them deposited directly into their bank accounts for safe transport.

Employees no longer need to wait around for a manager to calculate their tips and gain access to the safe. Instead, tips can be automatically sent to the employee's selected account at the end of his or her shift. This also means that employees will be sent their tips immediately, even if there is not enough cash on hand at the store.

manage tips without cash

Benefits for employers

Tip-to-card options offer even more benefits to employers and managers. Efficient cash handling, time management, cost savings, and detailed analytics are just a few of the advantages to implementing the program. Additional benefits include:

  • Automatic Calculations – Automatically calculate tip sharing amounts for tip pooling and sharing arrangements.
  • Time Management – Employers no longer have to make trips to the bank during business hours to get cash for tip disbursement.
  • Corporate Dashboard – A central dashboard that shows earnings, payouts across locations, standard and custom reports, and centralized notifications that display issues across the enterprise.

Some program also offer:

  • Cash Availability – Funds are not deducted from the employer’s account until two business days later.
  • Scheduled Deductions – Employers can deduct tip administration fees, FICA and insurance withholdings, and other deductions from an employee's tips prior to disbursing them.
  • Reimbursement – Employers can pay mileage and other reimbursements along with the tips onto a paycard or through direct deposit.

All of these benefits can translate to significant cost savings through accurate reporting, efficient labor management, minimized cash losses, and decreased employee turnover.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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