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What is tip pooling?

If you work in a service industry where you get tips, it's very important to know the legal side of these tips. They can impact how much you have to be paid in base hourly wages, how you report your taxes and much more.

However, some places don't use a standard tipping system, where a waiter or waitress is simply given tips by the customers and then keeps all of those tips. Instead, they use tip pools.

Generally speaking, a tip pool just means that all of the tips are bundled together in one large pot by everyone who is working. If there are 10 people involved and the net amount of tips for the day is $1,000, then everyone will go home with $100. The tips are just divided at the end of the night, when the shift ends and the place closes.

This is something that must be done legally and in compliance with federal laws. The laws technically refer to this practice as using a "valid tip pooling arrangement."

The main reason for a tip pool is because not all people working have the same chance to get tips, as only some of them interact with the customers. A waitress may see people all day long and get plenty of tips, but the bus boys who clear the tables won't get as many, since people are gone when they arrive. The cooks won't be tipped either, in most cases, despite making all of the food. A pool is meant to motivate workers, though some complain that it means a very effective waiter or waitress could actually lose out on tips by earning more than he or she is given when the pool is divided.

If you think you're not being given your tips in a fair manner, you may want to look into your legal options in Michigan.

Source: Undercover Waitress, "Understanding Tip Pools, Tip Credits, and Tip Outs," accessed March 11, 2016

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