According to the National Restaurant Association (NRA), as of November 2023, full-service restaurant employment levels were 4% below pre-pandemic levels in February 2020.
The restaurant industry still has a long way to go to fully recover, and challenges vary by segment, but one recent change sweeping through the industry is the way Americans tip.
According to Pew Research, 72% of U.S. adults say tipping is expected in more places today than it was five years ago, and only 5% say it is expected in fewer places.
The widespread adoption of point-of-sale (POS) tablets in various establishments, particularly in the hospitality industry, is driving a notable shift in tipping behavior among Americans.
With a streamlined tipping process – eliminating the reliance on cash transactions – customers can easily tip more, meaning employers need to figure out how to easily distribute tips to employees, square the books and ensure that tips are paid out to the correct employees in the correct amounts. This process adds a layer of complexity to accounting, tracking payroll for taxes and other financial tasks.
With the minimum wage for tipped workers far below the federal minimum wage of $7.25/hour – most restaurant wait staff paid only $2.13/ hour – servers heavily rely on tips to supplement their income.
Access to those tips on a timely basis is critical to employees’ financial wellness. And while employees need quicker access to their tips, providing it to them has often been a challenge, particularly for restaurants, as many patrons add tips to their debit and credit cards, rather than paying cash.
Restaurants need to be equipped with the necessary tools that can disburse real-time payments to staff, eliminating delays and the need to divide up cash at the end of a shift.
Digital tip disbursement, a relatively recent advancement in payment technology, allows workers to access their tips quicker, instead of having to wait until payday to receive them.
Benefits of Digital Tip Disbursements for Employers
Digital tip disbursements have a number of benefits for employers, including reducing:
The administrative burden associated with ensuring each employee receives the exact tips they are entitled to pon reconciliation of credit/debit card transactions.
The amount of on-hand cash needed to tip-out employees at the end of their shifts. Not having enough cash at the end of the night can lead to frustration for both employers and employees.
Errors associated with determining tip amounts, especially when tips are shared among different co-workers.
The risk associated with having a lot of cash on the premises (i.e., loss, theft, security).
Implementing real-time digital tip distribution can significantly reduce turnover and increase retention. By instantly allocating tips to staff based on their contributions, this system fosters motivation and fairness. Employees experience improved job satisfaction, leading to enhanced customer service and increased patronage. Ultimately, the positive impact on employee morale and operational efficiency contributes to a healthier bottom line for the restaurant industry.
Benefits of Digital Tip Disbursements, Including Non-cash Tips and Gratuities, for Employees
Benefits for employees are equally impressive:
Instant availability to their tips as they make them, without having to wait for credit/debit card reconciliations.
The convenience of receiving tips and their regular pay in the same form. Rather than receiving cash tips and a paper check, for example, employees can receive both digitally (via either direct deposit or instant payment).
No issue when a restaurant lacks sufficient cash to pay out tips.
Employees receive tips in a safe and secure way, without having to leave their place of employment carrying a lot of cash on their person.
Digital tips encourage more responsible financial behavior. Employees are apt to be more fiscally responsible when tips are disbursed into an account or to a pay card, rather than being received in easy-to-spend cash.
DailyPay Provides Real-time Digital Tips Access With DailyPay Tips
DailyPay Tips provides your employees with real-time digital tip access, helping you simplify operations, reduce risk and empower your employees. It integrates seamlessly with DailyPay’s scalable on-demand pay platform, making digital tip access scalable and manageable.
Access to tips is pre-funded by DailyPay and then settled through your normal payroll process. Run payroll as you always have; there’s no requirement to set aside payroll funds because DailyPay handles all employee early pay requests. Additionally, this funding model does not result in modifications to the employee’s pay stub. DailyPay Tips is instant, flexible, convenient and digital.
How DailyPay Tips Works
The payroll team provides employees’ information and Tips amount. Employees accrue a balance of earned and unpaid pay and Tips on the DailyPay platform
Employees can view their tips in real-time within the DailyPay app and transfer their available balance to the destination of their choice.
Employees choose when and how often to access their tips through an instant or next-day transfer
An employee can transfer their tips to any bank, debit card, payroll card or prepaid card.
DailyPay handles all the early payment of tips to an employee. The employer’s payroll team only needs to pay out the tips together with base pay once per pay cycle, on payday, through the normal payroll process.
By digitizing the payout of tips and delivering it directly to the employee’s account, DailyPay Tips minimizes the risk of dealing with escheatment responsibilities for the payroll department.
Learn more about DailyPay Tips.