Salesforce

Toast Payroll: Manage and Integrate Tips

« Go Back

Fields

 
Article Body
Save even more time with Toast Tips Manager! Give your employees peace of mind that daily tips are transferred to their paychecks accurately. 
 

In this Article:

 

What Are Tips?

As defined by the IRS, tips are discretionary (optional or extra) payments determined by a customer. Employees receive tips from customers and not from their employer. Tips include:
 

  • Cash tips received directly from customers.
  • Tips from customers through electronic settlement or payment, including credit cards, debit cards, gift cards (if applicable), or any other form of electronic payment method.
  • The value of any non-cash tips, such as tickets or other items of value.
  • Tip amounts received from other employees paid out through tip pools, tip splitting, or any other formal/informal tip sharing agreement.


Tips are the property of the employee. The only exception is when the tipped employees are participating in a valid tip pool. Learn more here.

In the Toast system, mandatory gratuity is not a tip, but rather a type of service charge. Continue reading to learn how to set these two apart.

Back to top
 

What are Service Charges?

The difference between service charges and tips is distinct and important. Service charges are line items added to a check by the business (not the customer) and may be for things such as delivery fees or an automatic gratuity for a large party. Customers are unable to negotiate or determine the amount of a service charge whereas they have total and complete control over the amount of a tip.

When a service charge is paid to an employee, this is known as mandatory gratuity. Employees should not report a mandatory gratuity as tips; employers must classify mandatory gratuities as non-tipped wages. The difference between service charges and mandatory gratuity is outlined in Get Started With Service Charges and Mandatory Gratuity.

Service charges retained by an employer are income to the employer (this is the case under federal law, but your state law may differ). Whether the service charge is attributed to the employee or employer is controlled by the below setting in Toast. To check how this is set on a specific service charge, navigate to Payments > Checks & receipt setup > Service charges and select the Name of a service charge.

 

Assign to check owner (Gratuity)? option in Toast Web

Service Charge Settings

In Toast Web, service charges can be created and maintained by navigating to Payments > Checks & receipt setup > Service charges. Several options live here and this page can help you generate a new service charge.


Back to top
 

Tips Reporting in Toast Web

View Tips by Day or Payment Source

From your Toast Web dashboard, select Sales summary from the Quick Actions menu to view the total sum of tips along with the breakdown of tips by payment source. Don't forget to set your date range appropriately. 

 

Sales summary left column with Tips highlighted 

 

Sales summary payments chart with tips highlighted


Back to top


View Tips by Cash/Non-Cash Per Employee

Navigate to Reports > Employee performance > Shifts. Looking at the Closed Shifts section, you'll notice each employee and their cash tips and non-cash tips, among other shift review data, who . Select the download icon to create a spreadsheet of this information.

 

Shift report of the sales summary with cash and non-cash tips showing


Back to top
 

View and Update Declared (Cash) Tips

From the homepage, select Labor summary from the Quick Actions menu to see tips per employee. Scroll down to the Employee Summary section and select a shift from the bottom of an employee's card (there's two in the screenshot below) to allow you to edit the Cash Tips Declared field.

 

Viewing an individual employee's tips on the labor summary

 

Updating declared cash tips on a time entry


Back to top
 

Update a Non-Cash Tip

When a non-cash tip needs to be adjusted, this is easily done on the POS as long as the check is from the same business day. Once a payment has been batched/captured overnight, the tip can no longer be adjusted.

Back to top
 

View a Tip Pooling Report

Navigate to Reports > Employee performance > Tip management to view the Tip Pooling report. This is used in conjunction with Toast Tips Manager to divide and redistribute tips based on the rules of a pooling system. Read on to learn more about tip pooling with Toast Tips Manager or see Get Started With Toast Tips Manager.


Back to top
 

Tips in Toast Payroll

Tip Earning Codes

The first thing to note is that tips in Toast Payroll will always be associated with an earning code. The most commonly used codes are Tips Paid and Tips Owed.

  • Tips Paid indicates a portion of tips which have already been paid to the employee before payroll is submitted. The most common method of this is tips paid out in cash immediately after an employee's shift, whether it be from direct cash tips or non-cash (credit card) tips. Tips Paid is an unpaid earning and it is present on payroll runs for wage reporting and taxation purposes.

  • Tips Owed indicates a portion of tips that are paid via payroll. Tips Owed is associated with any cash or non-cash (credit card, gift card, etc.) tips which are yet to be paid to an employee once payroll is submitted. Different restaurant configurations allow employers to use one or both of these earning types to record any tipped wages an employee receives.

  • Also, restaurants are allowed to create custom earning codes by emailing us this form, so tips may be labelled in other ways besides these two earning codes. Check with your HR team to confirm what earning codes are used for tips.

 

Paystub with tips owed and tips paid earnings

 

Note: Toast cannot use the same earning code for multiple sets of tips when using the Tips Manager module, so some of the custom earning codes Toast Payroll commonly sees are Credit Card Tips, Cash Tips, Cash Gratuity, and Non-Cash Gratuity.

Back to top
 

Tips on Timesheets and Paystubs

When you use Toast Tips Manager or the direct tip sync methods, the first place you will see tips in Toast Payroll is on an employee's timesheet. Tips will be broken down by shift and their specified earning code.

 

Employee timesheets with different tip earnings


Back to top
 

Tip Reporting in Payroll

Finally, for payrolls which have been previously submitted, you may view reports in the Report Library to gain insight and data into your tipped wages. In the Standard Report Library, Toast provides the FICA Tip Credit Report, but you may also create custom reports that allow you to add custom fields and filters to your report.

 

FICA tip credit report in Toast Payroll


Back to top
 

Bring Tips from POS to Payroll

There are three different methods to get tips from Toast Web to Toast Payroll:

Tips Manager


Toast Tips Manager is a highly robust and useful feature if your business uses pooled tips. Tips Manager can be used to automatically gather, pool, and distribute tips according to the rules put in place. Incorrect tips may even be retracted from Toast Payroll for quick adjustments. You may wish to consider the Tips Manager feature for detailed tip pooling policies.

Back to top
 

Direct Sync


The direct sync method is often used when there are no tip pooling policies in place. Each employee's own tips will directly sync from Toast Web to Payroll after they clock out and they do not need to be approved in Toast Web; only in Toast Payroll when the entire timesheet is approved.

Back to top
 

Manually Add Tips


Although there is no automation with this feature, this lets users enter manual tip amounts into payroll for complete control. It can be time-consuming if a large number of employees require manually-added tips, but the opposite may be true for small staff sizes. 

Back to top
 

Tips FAQ

How can I determine what tip policy and method are right for my restaurant?

Toast is unable to advise customers regarding appropriate tip pooling for their restaurant. However, all Toast Payroll customers have access to a suite of tools, known as your HR Toolkit, with our partner Mineral. Check out this page for a short, on-demand Toast Classroom covering the HR Toolkit feature of Toast Payroll. You may also find some FAQs here. Customers can also be referred to the Department of Labor website and state wage and hour enforcement agencies for assistance with tip pooling laws, regulations, and guidance.
 

How can I begin to troubleshoot my tips?

Tips lie in a number of places in Toast and different methods exist for bringing them from Toast Web to Payroll, so here are a few articles that may offer assistance with troubleshooting tips:
 


Back to top

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.

TitleToast Payroll: Manage and Integrate Tips
URL NameToast-Payroll-Tip-Processing

Powered by