[Updated for 2023] 7 Reasons Why You Need a Digital Tipping Solution

In the hospitality world, cashless payments now make up an overwhelming majority of sales. That means most restaurant guests are paying for meals either with credit cards or some form of digital payment (e.g., Apple Pay), and hotel guests are looking for cash-free alternatives to tip hospitality staff. The pandemic only accelerated this trend — making the need for digital tipping options more pronounced than ever before. 

To be fair, restaurants and bars are also driving the increase in cashless transactions. Many brands now offer online ordering, and we’re seeing a rapid roll-out of mobile apps in recent years — which means, of course, that more customers are paying (and tipping) online.

Operating with little to no cash on hand has its perks, but it presents a major problem when it comes to paying out tips to employees. Many restaurants and bars have already switched to digital tip payouts  — but for those that haven’t, now’s definitely the time.

Here’s everything you need to know about digital tipping and how to choose the right solution for your establishment.

What Does Digital Tipping Mean?

In hospitality, digital tipping, or digital tip payments, is the digital transfer of tip payments from one party to another. This can happen in two different ways:

  • A consumer digitally tips a service worker. This transaction is facilitated by tip acceptance software. For example, a hotel guest might scan a QR code or click a link in order to tip their bellhop on the spot.
  • An employer digitally pays out tips to their employees. This is facilitated by tip distribution or tip disbursement software. That means at the end of a shift, business day, or any designated pay period, employees receive their tips digitally. In other words: instead of paying out your bartenders, servers, and other floor staff in cash tips, you distribute tips instantly and electronically. 

What is a Digital Tipping Solution?

Right now, there are two primary ways that employers can instantly and digitally pay out tips to their employees:

  1. Pay cards: Also known as prepaid cards or payroll cards, pay cards are like debit cards in some ways. At the end of a shift, managers digitally load tips onto their employees’ cards. Technically, they’re “instant” — but unfortunately, prepaid cards can be problematic for restaurants. For one thing, these cards typically come with fees. They’re also not accepted by all vendors or at ATMs, and it can take days for funds to transfer from pay cards to employee bank accounts. 
  2. Instant tip payment platform: This is the “gig economy” approach to paying out tips. Much like Uber instantly pays its drivers, an instant tip payment platform allows managers to send tips to their employees’ bank accounts in real time. (It’s even faster than Venmo or PayPal, which put a hold on funds; with an instant tip payment solution, the money goes directly to employees’ accounts, no detours or waiting required.)

For the purposes of this article, when we talk about digital tipping solutions, we’re focusing on tip distribution software.

How Do Restaurants Pay Out Credit Card Tips?

Traditionally, restaurants and bars have paid out credit card tips in cash. At the end of a shift, managers would total each employee’s tips from credit card sales and pay them out based on their reported sales for that shift. The total amount of tips would be pulled out of the register or safe and divided up accordingly.

However, with an increasing number of customers paying with credit cards or digital payments, paying out tips in cash has become more difficult and time-consuming. Not only does it require restaurants to keep cash on hand that’s often not needed to fund their normal operations — but it also opens the door for potential discrepancies or errors when dividing up tips.

Enter digital tipping solutions, which eliminate the need for managers to handle and distribute cash tips. Instead, with tip distribution software, managers are increasingly able to track and pay out credit card tips electronically, saving time and headaches.

What are the Advantages of Digitally Tipping Out Your Employees? 

When you digitally pay out your employees (instead of cash or payroll tips), everyone benefits: your employees, your managers, and your business. There are seven key benefits to making the switch to digital tip payments.

1. Cash Shortage Problem, Solved

As we move toward an increasingly cashless society, the cash shortage problem is one of the most compelling reasons to switch to digital tip payouts. For many restaurants, bars, and hotels, the pandemic was a major turning point: The percentage of credit card and digital transactions rapidly increased, meaning employers often didn’t have enough cash on hand to pay out tips at the end of the day or shift. 

The great thing about digital tip payouts: you never have to worry about having enough cash in the safe at the end of a shift.

That means no more bank runs — giving your managers hours back in their week. And if you’ve resorted to paying for pricey armored car services? That’s an expense you can cut: Using a digital tip payout solution is only a small fraction of that cost.

2. Instant Access to Earnings 

Many employees enter the hospitality workforce because of the promise of daily payouts. That’s been the industry standard for years — but given the cash shortages noted above, it’s increasingly difficult to ensure employees get their earnings at the end of every shift. 

As a result, some employers pay out cash less frequently or make a drastic org-wide shift to payroll tips. But that can be problematic for employees who can’t afford to wait days or weeks for their pay.

Digital tipping solves cash management headaches while giving your employees the instant access to earnings that they expect and deserve.

As an added bonus, when you distribute tips digitally, the funds go directly to your employees’ bank accounts, wherever they bank, which promotes financial responsibility. Yes, earnings are immediately accessible — but your employees are less likely to make impulsive purchases when their money is in the bank, not on their person.

3. The Power of Choice

While instant, direct-to-bank tip-outs are often the best option for restaurant teams, it’s important to keep your employees in the driver’s seat when it comes to how they’re paid. 

As noted above, some restaurants have dealt with a low-cash environment by switching from cash tips to payroll tips. And while payroll has its perks (e.g., low administrative burden), a unilateral change that causes financial strain can negatively impact recruiting, retention, and workplace culture. 

On the flip side of that, you might have employees who are unbanked, meaning pay cards are the best cashless option. 

The right digital tipping solution prioritizes flexibility, so you can give your employees options for how they receive their cashless tips without creating extra administrative burdens for you (or your bookkeeper).

4. Competitive Hiring Advantage

For years now, hospitality employers have faced a tough labor market. It’s always been hard to find and retain good talent — and now, with gig economy employers on the scene (think: Uber, DoorDash), it’s even more challenging. 

Offering instant, cashless tip-outs is one of the best ways to stay competitive not only with other restaurants and hotels but also with the Ubers of the world.

As the hospitality industry continues to bounce back, those employers that offer digital tipping have found that it’s a useful recruiting tool and a true long-term retention play that’s “stickier” than one-time signing bonuses and other hiring gimmicks.

5. Reduce Liability and Room for Error

If you’re making bank runs or having cash delivered to your restaurant in order to distribute cash tips, you’re at a higher risk of theft and skimming. Plus, counting, recounting, and distributing cash leaves room for human error — and can lead to tip disputes, which aren’t fun for anyone. Digital tip outs solve all of these issues.

On top of preventing counting errors, digital tipping solutions can put up guardrails to prevent improper tip pooling practices. Restaurants and bars have a lot of tipping laws to keep up with — and these laws are almost always in flux. With software like Kickfin, you can stay in compliance with federal, state, and local tip laws, no matter where you live.

6. Keep Your Employees Safe

While digital tipping protects businesses from theft, it can keep your employees safer, too.

Many hospitality workers leave their shifts late at night with a pocketful of cash — making them incredibly vulnerable. Unfortunately, it’s not uncommon to hear stories of unsuspecting employees getting mugged (or worse) after closing up.

While there’s a larger conversation to be had about ensuring the general safety of employees, making the switch to digital tips ensures your people aren’t walking out of your establishment in the wee hours of the morning with wads of cash in their wallets.

7. Save Time and Money

Digital tip payouts save restaurants time and money. They don’t require counting, recounting, and distributing tips, giving managers hours back in their weeks. And because there’s little admin work required, checking out at the end of a shift becomes much faster and more streamlined, reducing labor costs. 

Digital tipping also solves for one of the hidden costs of cash tips: often, managers don’t have exact change on hand and they’ll round up to the nearest dollar. When that happens for every employee, after every shift, every day — well, it adds up. Digital tip payouts are always the exact amount an employee is owed, not a penny less or a penny more.

How Do You Choose a Digital Tip Payout Solution? 

There are a couple of different options when it comes to digital tip payout solutions. 

Pay Cards

Pay cards are one way to go when exploring digital tip payout solutions. A lot like debit cards, managers issue pay cards to employees and digitally transfer funds via an integrated software system at the end of each shift or pay cycle. 

The money stays on the card and can be spent using the card itself or deposited into employees’ bank accounts. Or they can even withdraw money from it, just like an ATM card. 

While pay cards might seem like a solid low-cost solution for employers, there are some major drawbacks to pay cards that put your employees at a disadvantage. Reasons to avoid pay cards include: 

  • Hidden fees
  • Long transfer times
  • Low vendor acceptance
  • Fewer regulations

(For more information on why pay cards might not be the best option for your restaurant, see why Rock N Roll Sushi switched from pay cards to Kickfin’s digital tipping solution.)

Instant Tip Payment Platform

Another digital tip payout solution is Kickfin. In fact, it’s the #1 tip distribution software on the market. 

Hospitality employers can set up Kickfin in one day — and it integrates with software you’re already using. Once you’ve uploaded your employees into the Kickfin portal, they can choose to enroll either by text message or email in seconds. Tips are transferred directly into their bank accounts instantly at the end of every shift, so there’s no more waiting hours (or days) to get what they’re owed. 

The Kickfin platform is also a breeze to manage. You can add, remove, or edit employee information easily. Reporting features offer innovative tracking with the ability to roll up payments made over time across locations. Kickfin is safe and secure, meaning we’re 100% PCI compliant. Employees never have to share their personal banking information because it’s not stored in the system. And when you need reporting, download information seamlessly into a .csv file for easy EOY filing. 

Make the Switch to Digital Tipping

Leveraging a digital tipping solution is a no-brainer. The key, of course, is choosing the right digital tipping platform for your business.

To see why restaurants and bars across the country are switching to Kickfin, check out some of our favorite success stories. Or better yet, get in touch and we’ll walk you through a personalized demo of our platform.

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We kicked off 2025 with some major (!) updates to our Tip Calculator features.

It was a big release, and we’ll break it all down for you here — but the big headlines are:

  • More integrations
  • More speed
  • More flexibility

If you’re not already using Kickfin — or if you haven’t integrated Kickfin with your POS to automate tip calcs just yet — this is for you! Read on to see how you can use Kickfin’s newest tip calc features to un-clunk your tip pooling process. 

More integrations, coming right up

We’re continuing to roll out integrations with the leading POS systems, giving restaurant teams the power to auto-calculate tip pools and shares in a matter of clicks. 

(Side note: Kickfin only builds direct POS integrations — not using a third-party solution! — which streamlines your tech stack and keeps your costs lower.)

We were thrilled to add RPOWER to our growing list of integrations, which already includes Toast, Square, SkyTab, SpotOn, PAR and more.

If you’re an RPOWER user and you’re not yet a Kickfin customer, request a demo and we’ll show you the integration in action!

Handle autograts with ease

For servers and bartenders handling large parties, autograts can be great — but for managers, they can turn into a logistical nightmare. Now, Kickfin can help with that…

With this latest release, you can break tips and autograts into separate categories with their own set of rules for distribution. You have the flexibility to manage autograt tip splits completely separate from regular tip outs, so you can fairly reward a hardworking server-bartender-busser trio for a job well done on a 30-top.

Tips & Autograts Broken Out on Tip Data Page

Tips & Autograts Broken Out on Review Screen

With this new set up, you’ll also get more transparency in reporting. You’ll be able to see the breakdown of tips and autograts collected by each user in your reporting dashboards (more on that later!).

Include cash tips in your distributions 

You heard that right — we can now distribute shares of cash tips digitally, directly to your employees’ bank accounts. Instead of doing the math on cash tips by hand, you can easily add cash to your tip pool, and we’ll calculate the share among employees for you. 

Important note: cash distributions aren’t available for all of our integration partners. Contact us for more info. 

Advanced Tip Rules (for even the unruliest policies)

Think your tip policy is extra tricky? Don’t worry — we’ve seen ‘em all. And there aren’t many Kickfin can’t handle, thanks to our Advanced Tip Rules feature.

If you have Advanced Tip Rules enabled, we’ve added a few new capabilities so you can further customize your tip share while we take care of the complicated math behind the scenes. Here are just a few examples of the new features we’re rolling out. 

Not using Advanced Tip Rules? Reach out to us if you’d like to enable these features. 

Per Segment Tip Sharing

We’ve been calculating tip shares on a check-by-check basis. For example, if you have servers sharing a percentage of tips with bussers, we would only calculate and deduct that percentage if a busser was working at the time that a check was processed. We call this Per Check Tip Sharing

Now, we’re introducing Per Segment Tip Sharing, which gives you the option to deduct a tip share from every check processed during a shift. Let’s go back to our example — servers sharing a percent of tips with bussers. With Per Segment Tip Sharing, we would deduct a percentage of the server’s tip for every check processed, even if the busser gets cut two hours before the server. 

Split Evenly 

Would you prefer that all of your support staff take home an even share of their tip pool? We can now make that happen.

Previously, our tip shares entered a pool and were divided among beneficiaries based on how many minutes they worked during a shift, which we call splitting by Time Worked. With our new product update, we’re introducing the Split Evenly option, which enables you to send an equal part of a tip share to every beneficiary that worked within a segment. 

More accuracy 

In the past, cash autograt payments were lumped in with credit card autograts and credit card tips, resulting in credit card fee deductions on cash transactions. But that is no more! 

Now we’re able to deduct credit card fees only where they apply, so you’ll no longer see credit card fee deductions attached to cash autograt transactions. 

Plus, we’ve gotten even better at math. With our new update, we can prevent rounding errors, so our tip disbursal should match the tips collected in your POS to the penny. 

Revamped and expanded reporting 

We added new reporting views to give you more insight into each pay period, individual pay sets, and tip calculations. Here’s a quick look at your new pay period report with expanded filters:

Main Pay Period Report - Filter Bar Expanded

You’ll notice that there are now separate columns for tips and autograts, but you can still view the gross amount earned (tips + autograts = gross).  

And it doesn’t stop at the main reporting page. You’ll see this more detailed reporting when you look at individual employee pay period reports, review a specific pay set, or export the information from any of your reporting dashboards. 

We know this is a lot of new information to take in — but we’ve got you covered with our full Product Release Recap. Simply log in to Kickfin, click on your name in the upper left corner and select “Support” to access that portal. 

Not using Kickfin? Dying to get rid of your old-fashioned gratuity management system? Drooling over these new features? We’d love to have you. Reach out to us today to see how our platform could save you time and money.

Do you start getting heart palpitations when you see a large party reservation in your section? This one’s for you.

Maybe your restaurant is a local go-to for corporate dinners, milestone celebrations, and birthday parties…or maybe you regularly get blindsided with 20-top walk-ins when you least expect it. 

As every hospitality pro knows, no matter how prepared you are, managing large parties can be tricky. But if you do it right, it can be a fast track to large tips. 

So the next time a 20-top bachelorette party drops in and “forgot to make a reservation:” no need to hyperventilate! We’ve got the tips and tricks that can keep you sane throughout a large party — and hopefully help you reel in a well-deserved tip. 

4 Tips for Staying Organized 

When your 25+ top walks in, getting overwhelmed can lead you to drop the ball on service and hospitality because, hey — you’re just trying to get right right food, to the right person, as fast as possible. But your guests can pick up on when you’re frazzled or frustrated, which can impact their experience (as well as your tip).  

Here are a few ways to stay organized and calm throughout service.

1. Get (a little more) familiar with your POS

Every POS system is different, but most have come quite a long way in terms of features and flexibility. There are likely bells and whistles on your POS that you might not use every day, but that can make managing large parties much more seamless.

So use all that tech to your advantage. Set aside time for some extra training or research to understand what your POS is capable of, so that it’s all muscle memory the next time you have a large group sitting in your section. 

For example, here are just a few things you should know about your POS as it relates specifically to large parties:

  • Is there a max number of ways you can split a bill evenly? 
  • How many checks can you create on each table? 
  • How many ways can you split a single item? 
  • Do you need manager permission to add auto-gratuity? 

2. Assign seat numbers

The only way to stay sane when dealing with a large party is to assign seat numbers — and stick to them. 

You should assign seat numbers starting with your first guest on the left and continue around the table moving counterclockwise. As you put in the first round of drink orders, your POS should allow you to assign items to a seat number. Even if guests move to different seats throughout the meal, stick to their original seat number. 

Sure, it’s tedious — but these numbers will be your saving grace when someone asks you for another drink or when they want to split the check by family. No matter how in the weeds you are, take the time to add seat numbers. You’ll thank us later.

When they ask for 15 separate bills, you can just drop each seat number into a new check and print. No need to go back and ask, “who had the fish?”

3. Don’t trust your own memory 

As a server, it’s normally a crowd-pleasing flex to take everyone’s order from memory. But when you’ve got 17 people depending on you to make grandma’s 97th birthday lunch a success: Pull out your server book

Not only are you bound to forget something, but your guests may not feel entirely comfortable either. If they’re worried you’re going to forget they want their sauce on the side, they may be less inclined to ask questions about specials or which dishes are your favorites. And if guests feel like they have to stick to the basics, you’re missing out on all of your upselling opportunities. 

Just for the night, don’t be a hero: write down everyone’s order!

4. Bring in some help 

Depending on how many guests you have at one table, you might need more help than normal — and there’s no shame in that.

If you’re aware that a big party is on the books, coordinate with your team ahead of time. For example, see if you can have an assigned busser or bartender on call to help you keep drinks filled, tables clean, and guests happy.

Wowing Your Guests 

To secure the huge tips that come with large parties, you’ll have to go above and beyond. 

  • Be ready to make suggestions. Being knowledgeable about the menu always reflects well. Explain your specials in detail, offer drink pairings, and accommodate guests with special requests. This is your shot to upsell and increase the bill! 
  • Keep the drinks flowing. No one wants an empty glass. Send bussers around with pitchers to top off waters, and always be ready to grab another round of cocktails. 
  • Stay in contact with the kitchen. Give the chefs a heads up that you’re going to put in a large order so they can prepare accordingly. With more preparation, they’ll be able to get the whole table’s food out in a timely manner. No long waits for everyone to receive their food! 
  • Pre-bus as much as possible. Keep the table neat and tidy, so they have rooms for multiple rounds of appetizers, drinks, and dessert. 
  • Use your seat numbers. You shouldn’t have to serve entrees as if it’s an auction. Instead of announcing each dish to ask, “who had the burger?” you should be able to reference their seat number and pass each entree to the right guest. It’s a simple way to show your serving prowess (and speed up the serving process!). 

Even with a crowd at your table, you can go above and beyond on service. Your guests will take notice and show their gratitude on the tip line (more on that later).

Splitting the Bill

You’ve made it through most of the craziness of a large party — but now it’s time to settle the bill. Before everyone closes out their tabs, you might have to navigate a few sticky situations. 

Who’s paying? 

It’s always awkward to stand next to the table while people fight over who’s taking care of the bill. Here’s what you can do to alleviate some tension:

  • If someone offers to pay early on in the meal, take them up on it. Go ahead and keep their card so you can run it before the arguments start. 
  • When 3 different people want to pay for the meal, offer to split the bill evenly. They probably won’t take you up on it, but your suggestion should get one of the parties to acquiesce. 
  • Ask how checks will be split at the beginning of the meal to avoid the awkward card dance at the end. You’ll also have an easier time splitting items if you know ahead of time! 

To auto-grat or not to auto-grat

Do you want to make sure you get your full 20% tip after a big table runs you ragged? Or would you rather take the risk in hopes that you’ll get an even bigger tip? 

If your restaurant has an auto-gratuity policy for large parties, some servers prefer to take the sure thing and hope that your guests feel inclined to give you an extra thanks on top of it. Most guests aren’t offended and even appreciate that they don’t have to do any math — but make sure that they’re expecting the service charge. A simple line like, “We have already included a 20% gratuity in accordance with our large party policy,” goes a long way. 

When you have a really fun rapport with a table, it might be the right time to forgo the auto-grat and let your guests decide how much they’d like to thank you. Keep your guests in the know, too! Some may assume that you included gratuity and skip the tip line altogether. 

Either way, steel yourself before you look at their final bill. You might be surprised when customers leave less than you expected, or you might be treated to a heavier-than-average tip. 

Tipping out 

After it’s all said and done, your manager may have a tip out policy for supporting bussers and bartenders who assist with large parties. Make sure you know what to expect to take home after tipping out your team. 

And managers, Kickfin makes large party tip outs easy. Make sure that your event bartender gets their fair share of server tip outs, without spending hours with your calculator. 

>>Learn more about Kickfin’s newest tip calculation features

Whether you’re hosting a graduation party or taking care of a corporate holiday dinner, be ready to handle it with the same care and attention you give to a two-top — and let the big tips roll in! 

We’re thrilled to announce that Kickfin made the Deloitte Technology Fast 500™ list, a ranking of the 500 fastest-growing technology, media, telecommunications, life sciences, fintech, and energy tech companies in North America.

How Kickfin stacks up

Overall, 2024 Technology Fast 500 companies achieved revenue growth ranging from 201% to 153,625% over the three-year time frame, with an average growth rate of 1,981% and median growth rate of 460%.

Our 2,144% revenue growth earned us the 65th spot on Deloitte’s list. It’s another exciting milestone for Kickfin — but more importantly, it’s a meaningful validation of our mission to take the clunk out of tip management, so payouts are faster, smarter and safer for every restaurant team we serve. 

Based on Deloitte’s ranking, Kickfin is:

  • The highest-ranked restaurant tech company on the list
  • The *only* tip management company on the list
  • Austin’s fastest-growing tech company

Growth driven by product innovation, demand for automation

Kickfin was the first digital end-to-end tip management solution on the market — and with more than $2 billion payouts to more than 250,000 restaurant employees, we continue to be the largest and top-ranked.

Why?

It comes down to working the way our customers work — and not the other way around. Not only do we automate the tip pooling and payout process for thousands of restaurants and bars; no two tip policies are alike, so we’ve built a solution that gives them the flexibility and customization they require.

With more than $2 billion payouts to more than 250,000 restaurant employees, Kickfin continues to be the largest and top-ranked tip management software on the market.

That’s a big reason we’ve focused on building direct, robust integrations with the leading POS systems on the market. So far, we’ve rolled out integrations with Toast, SkyTab, Oracle, PAR, Heartland and Square — and the list continues to grow.

“In recent years, digital tip management has become table stakes,” said Justin Roberts, Kickfin’s co-founder and co-CEO. 

“Operators now understand the significant efficiencies to be gained by eliminating manual tip-out processes. It’s no longer a question of ‘if,’ but ‘how.’ As a direct result of our commitment to innovation and customer success, we’re thrilled to see more and more restaurants select Kickfin to modernize their tip management.”

A big thank-you to our customers who trust us with their payouts, to our partners who support, collaborate (and integrate!) with us, and of course, every member of the Kickfin team.

About the Deloitte 500

Now in its 30th year, the Deloitte Technology Fast 500 provides a ranking of the fastest-growing

technology, media, telecommunications, life sciences, fintech, and energy tech companies — both public and private — in North America. Technology Fast 500 award winners are selected based on percentage fiscal year revenue growth from 2020 to 2023.

In order to be eligible for Technology Fast 500 recognition, companies must own proprietary intellectual property or technology that is sold to customers in products that contribute to a majority of the company’s operating revenues. Companies must have base-year operating revenues of at least US$50,000, and current-year operating revenues of at least US$5 million. 

Additionally, companies must be in business for a minimum of four years and be headquartered within North America. 

Ready to take the next step?

See how brands like Walk-On’s, Marco’s, Bar Louie and more are automating tip pooling and payouts with Kickfin. Schedule your 10-minute demo today

It’s an election year, in case you haven’t heard! 😉 This one has major implications for tipped employees — specifically, when it comes to taxes.

It’s no secret that our Democratic and Republican candidates are running on very different platforms. But when it comes to tip regulations, Vice President Kamala Harris and Former President Donald Trump actually both support reducing taxes on tips

A little context on taxes and tips

We’re just going to state the obvious: For the average American, tax reporting can be pretty, pretty confusing. For the millions of employees working in tipped occupations — well, that creates another layer of uncertainties.

(Do I have to report my tips? Do have to report my cash tips? Will anyone know if I don’t report my tips? What happens if I don’t accurately or fully report what I earned?)

Historically, there’s been a trend of hospitality employees underreporting cash tips to prevent higher tax burdens. And while this may reduce what employees owe Uncle Sam in the moment, there can be downsides: e.g., if they find themselves eligible for unemployment, if they’re trying to qualify for an auto loan or mortgage, etc.

However, that urge to underreport could be relieved in the near future, given the tax code changes both of our presidential candidates have proposed. The TL;DR: Both Trump and Harris have voiced their intention to relieve some of the burden on tipped workers in restaurants, bars, hotels, and other service positions. 

Here’s a quick summary of each candidate’s plan, as well as some potential impacts for restaurant employees. 

Trump’s plan for tipped employees 

Trump shared his plan to reduce tipped income tax burden at a rally in Las Vegas — fitting for a city that’s built on the gig economy. Nevada is home to the highest concentration of tipped employees who work in the many hotels, casinos, and restaurants that millions of tourists flock to annually. 

During the rally, the former president announced that he would make tipped income exempt from federal income tax, stating it would happen “right away” when he takes office. 

Since speaking at the rally, Trump has not yet clarified what this would mean for tipped employees. Many servers want to know if this is an exemption just on federal income tax or if the proposal includes payroll taxes (social security and Medicare). 

Harris’s tip tax proposal 

Harris also took the opportunity to speak on her tipped income policy while visiting Nevada. Much like Trump, she knew she’d have a captive audience when it comes to tipped earnings. 

Her proposal promises to exempt tipped income from the federal income tax, but she has made clear that tips will still be subject to payroll taxes. While not yet confirmed, campaign insiders say Harris is considering placing some guardrails on her plan — like a caveat that the tax exemption only applies to employees earning less than $75,000 per year. 

Is one plan better than the other? 

In short: probably not. (Most service and hospitality workers do not earn above the $75,000 threshold that’s been suggested by the Harris campaign.) So either way, servers, bartenders, and hospitality staff can expect to see a lower tax burden during the next administration. 

But what does that look like in practice? 

Most tipped employees aren’t receiving their tips on payroll — they’re walking out of every shift with their earnings for the night, deduction-free. Instead, the taxes are paid on payroll out of their hourly earnings, which is why many servers get $0 paychecks every two weeks. With a reduced tax burden, most servers will see the difference in higher paychecks.

On the other hand, economists are wary of the impact of eliminating taxes on tips, citing the reduced funding for social security and Medicare. And with so much negative sentiment around “tipflation” these days, experts also speculate that a reduced tax burden may result in even more hesitance at the tip screen. 

Increasing minimum wage 

We’re closely following campaign promises about an increase to the minimum wage — especially in regards to the tipped minimum wage and the tip credit

Minimum wage earners have been eyeing an increase, noting that the federal minimum wage of $7.25 per hour hasn’t increased since 2009, and servers, bartenders, and other tipped employees have been earning $2.13 per hour for over 30 years. An increased minimum wage paired with the reduced tax burden could make a major difference for service workers trying to keep up with the rising cost of living. 

In the Harris camp, removing tax on tips is just part of the plan to take some pressure off service workers. While Harris hasn’t shared a detailed plan for bumping up the minimum wage, she has indicated that she would support an increase

In previous election cycles, Trump stated that he would consider a minimum wage increase, but he has not shared his opinion on the matter during the 2024 presidential campaign. 

Of course, we’re a ways out from any real policy changes actually shape — but if you’re looking to make your tip management process less taxing in the interim (see what we did there?), Kickfin is here for you! Check out how you can use Kickfin to auto-calculate tip pools and send payouts directly to employees’ bank accounts in seconds.

See Kickfin in action!