Canadian Restaurant Association recommends setting up a staff run tip committee. The committee meets on a regular basis, decides on the strategy for calculating staff share of tips, and distributes the tips to individuals. A tip committee takes the employer out of the equation and fits the definition of “direct” tips. Without this step money flowing through a tip pool can be deemed “controlled” and therefore subject to EI and CPP.
Creating a Tip Committee
It’s important that your Tip Committee is run by the staff. To eliminate liability you want to remove any indication that the restaurant “controls” tips. Find at least 3 staff members willing to serve on the committee and represent the staff as Directors of the Tip Committee. You will need staff buy-in to this process so begin here; a nomination and vote procedure at a staff meeting is a good start. The business wants to reduce liability so it’s important to document the operations of the Tip Committee, beginning with the appointment of its directors.
Now that you’ve got staff representatives, their first order of business is establishing and documenting the rules and guidelines under which they will operate. They should meet some basic requirements:
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Committee must meet regularly - at least once a year - where they fill vacant Directors positions and decide on rules for tip distribution
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Communicate the tip sharing rules to the rest of the staff and have them sign an agreement that documents their approval and participation in the tip sharing arrangement. They will need a standard form for all new employees to sign.
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Document tip distribution and share these documents with the restaurant for retention in case of an audit
Once your committee is established and a signed collective agreement is reached by the staff its time to empower them to enact their plans. They will need access to cash to cover the tip pool balance and the data required to calculate tip share (usually time sheets).
BlackFox provides the tools for your committee to implement a tip-out policy, collect and track the tip pool, distribute to staff based on the chosen rules, and BlackFox documents the entire process for you.
References
Canadian Restaurant Association - Tips, source deductions, and how to protect yourself from liability Part 1 & 2
May 30