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Your Guide to Instant Employee Tip Payments

restaurant employee receiving instant tip

As a restaurant owner or operator, you know your employees’ financial security depends heavily on their tips. 

According to the National Employment Law Project, the average hourly earnings from tips account for almost 60% of wait staff earnings, and 54% of bartenders’ earnings. On a monthly basis, this amounts to just under $900 a month, which is typically more than what most of the floor staff receives through their hourly wage. 

But too often, restaurants and other service industry providers aren’t instantly tipping out employees — or they think they’re tipping out their employees instantly, but it’s not quite as instant as it seems.

Here’s what every restaurant owner needs to know about instant employee tip payments: what they are, why they matter, and how to choose the best method for your team. 

What does it mean to instantly tip out employees?

Instantly tipping out employees means just that: you’re giving your wait staff, bartenders, and other restaurant employees real-time access to the tips they earned during their shifts. 

There are three primary ways that employers can pay out tips:

  1. Payroll tip payout
  2. Cash tip payouts
  3. Digital tip payouts 

Of those three options, payroll clearly does not fall into the instant tip payment category. Employees who are tipped out on payroll don’t receive any earnings (gratuities or hourly wages) until they receive their paycheck.

Cash and digital tip payments qualify as instant tip payments in theory. But the reality is that employees often still have to wait for their earnings.

Digital tip payouts

In our book, “instant” means your employees get real-time access to their funds using a digital tipping platform. But not every digital tipping platform is created equal.

If you’re counting paycards as “instant,” — well, that’s not exactly the case. Employees who receive tips on paycards can have a hard time actually getting access to their funds. Paycards aren’t accepted at many ATMs or retail locations, and transferring funds to the bank can take days. (On top of that, paycards often come with predatory fees.) 

Cash tip payouts

Even for restaurants that tip out in cash, it’s often just the closers who get their cash tips at the end of their shift. Everyone else has to make a trip back to the restaurant to pick up their cash (or wait until their next shift).

Another important point: paying out cash tips is never really instant on the employer’s side. That’s because (if you’re not automating your cash flow), your managers are essentially playing the role of a bank teller. From bank runs to counting and recounting cash to distribution — not to mention handling inevitable tip disputes — cash takes a whole lot of time.

Bottom line: there’s only one real way to pay out tips instantly, and that’s by completely automating the tip out process.

Why is it important to use an instant employee tip payment platform?

When restaurants choose to use an instant employee tip payment solution, everyone wins. That’s because:

  1. Employees want (and deserve) it: With Covid in play, employees need instant access to their earnings now more than ever. The economy is shaky and jobs aren’t as secure as they once were; many restaurants are continuing to cut back shifts. Employees can’t afford to wait for payroll to roll around, or for their paycard funds to transfer to their bank.
  2. It saves time: Again, while cash can be instant for employees, it’s never instant for employers. With credit card transactions on the rise, there’s less cash on hand to tip out, so managers are making more bank runs than they already were — and that takes even longer in a pandemic, when many bank branches are closed or open by appointment only. Then there’s the counting, distribution and inevitable tip disputes that eat up hours every week.
  3. You’ll cut costs: Saving time means increasing efficiency and reducing labor costs. When employees aren’t waiting around on the clock for their earnings, shift after shift — that adds up. Plus, managers get time back in their week when they’re not running to the bank on a daily basis.
  4. You’ll stay competitive: In our gig economy, employees are apt to look elsewhere for employment if they’re not getting paid in real time. 
  5. There’s complete transparency: When employees wait days or weeks for earnings, it minimizes visibility and sets the stage for tip disputes.

What are the options for instant tip payments?

To recap: payroll isn’t instant (no surprise there), and paycards can appear to be instant — but they’re not.

That leaves you with two options for instantly tipping out your employees:  

  • Cash: It may seem like there’s nothing quite as real-time as handing someone an envelope of cash. But for employers, cash isn’t instant — especially during a pandemic. (And as we’ve discussed previously, there are a whole lot of time and financial costs associated with using cash.) 
  • Kickfin: Kickfin is the only way to truly pay out tips in a way that’s instant for both employees and employers. Tips are automatically transferred directly into employees’ bank accounts, the second the shift ends, 24/7/365.

Ready to try us out? Get a Kickfin demo today!

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