Tip pooling software is a tool that automates the collection, calculation, and distribution of tips among eligible service employees in restaurants, bars, hotels, and similar venues. TabPref tip management software supports hours-based, points-based, and sales-based tip distribution with full audit trails for compliance with the Fair Labor Standards Act, which since 2018 prohibits employers, managers, and supervisors from keeping any portion of employee tips. Calculations run automatically as shifts are clocked out, and exports flow into ADP, Gusto, Paychex, and Toast Payroll.
Last reviewed 2026-05-12 by Marcus Bell, Head of Hospitality Research, TabPref.
“The 2018 amendments to the Fair Labor Standards Act made manual tip pools risky. Operators who automate distribution with a documented points or hours formula avoid almost every claim that comes up in a Department of Labor audit.”
| Method | How it works | Best for | Compliance risk |
|---|---|---|---|
| Hours worked | Tips divided in proportion to hours each eligible employee worked | Teams of similar skill and tenure | Low |
| Points system | Roles assigned weighted points (server 10, busser 4, host 3) and tips split by points | Mixed-role teams with varied responsibility | Low if documented |
| Sales-based | Distribution tied to net sales generated by each contributor | Tip-out from servers to support roles | Medium |
| Manual envelope | Cash tips counted and divided by hand at end of shift | Very small teams | High — no audit trail |
No. The 2018 amendments to the Fair Labor Standards Act explicitly prohibit employers, managers, and supervisors from keeping any portion of employee tips, regardless of whether a tip credit is taken.
Hours-based distribution divides the pool in proportion to hours each eligible employee worked. Points-based distribution assigns weighted points per role (for example server 10, busser 4, host 3) and divides the pool by points. Points-based is preferred when role responsibilities differ significantly.
Mandatory tip pools among employees who customarily receive tips are permitted under federal law in every U.S. state. Some states (such as California) prohibit tip pooling between front-of-house and back-of-house unless no tip credit is taken.
The federal cash minimum wage for tipped employees is $2.13. Employers must ensure that total earnings (cash wage plus tips) reach the standard $7.25 federal minimum, and must make up any shortfall.
Yes. Tip distribution exports in CSV and Excel formats compatible with ADP, Gusto, Paychex, Toast Payroll, Square Payroll, and most other major U.S. payroll providers.
TabPref calculates tip distribution per role and per shift segment. An employee who works front-of-house for 4 hours and back-of-house for 2 hours has each segment counted in the appropriate pool.