PaidFairHow tipping actually works
There is a lot of confusion about tipping, and most of it comes from people repeating what the last restaurant they worked at did. These are plain-English answers with the primary source linked, so you can check us.
We are not the source and we don't pretend to be. Every factual claim here links to the agency that publishes it — usually the U.S. Department of Labor or a state labor department — with the date we last reviewed it. Wage rules change. Check the source before you act on anything.
Start here
Federal law
Is tip pooling legal?
Who may be in a pool, why managers and owners never can, and how the tip credit decides whether back of house is eligible.
State by state
Tip laws by state
Which states ban the tip credit, what the tipped cash wage is, and what each state's own labor agency says. 17 states covered.
Method
How to split tips fairly
Hours, points, or percentage — what each method rewards, what it punishes, and which one survives being questioned.
Method
Tip-outs explained
How tip-outs to bar, bussers, and runners are calculated, and why the sales-versus-tips choice matters on a bad night.
Tax
No Tax on Tips
What the federal tip deduction does, what it doesn't do, and the separate W-2 reporting change that starts with 2026 wages.
Free tools
No signup, nothing stored, nothing sent anywhere. Run a real shift through them.
Calculator
Tip pool calculator
Who worked which hours, what the jar counted — get each person's exact share, reconciled to the penny with the math shown.
Calculator
Tip-out calculator
Work out what you owe the bar, bussers, and runners by percent of sales or of tips — and exactly what you keep.
Template
Tip pooling policy template
Answer a few questions, get a written policy you can print, post, and hand to new hires — and a warning if your pool conflicts with your tip credit.
By business type
The same rules land differently depending on what you run. A taproom has no table sections; a salon mostly doesn't pool at all.
Bars & nightclubs
Multiple counts a night, barback tip-outs, and shifts that cross midnight.
Restaurants
Layered tip-outs, the back-of-house question, and payroll-ready exports.
Cafés & coffee shops
Short overlapping shifts and a team of part-timers sharing one jar.
Food trucks
Two or three people, one jar, no office, and it has to work on a phone.
Breweries & taprooms
Counter service with no sections, and staff splitting time with production.
Salons & barbershops
Individual tips, assistant tip-outs, and the booth-rent question.
The one thing that runs through all of it
Almost every tip dispute comes down to the same thing, and it is never the percentage. It is whether anyone can show who was working, what was counted, and how it was split.
That is true legally — employers carry the burden of proving that tips brought each tipped employee to full minimum wage — and it is true socially. A server who can see the arithmetic behind their number stops asking about it. A server who gets handed a figure with no explanation asks every week.
This is the whole reason PaidFair exists. It splits tips by the minutes each person actually worked, shows the math on every payout, keeps the per-person record, and exports clean hours and tips for payroll. It never touches cards and moves no money.
Free cash register forever. Everything else is $29/month per location with a 14-day trial — no card to start.
General information, not legal or tax advice. PaidFair is not a law firm or an accounting firm. These guides summarize published rules and link to them; they are not a substitute for advice about your business. Confirm anything you plan to act on with the relevant agency and a professional in your state.