How to Implement Digital Tip Payouts at your Restaurant

The staff retention landscape is changing across the restaurant industry. During the pandemic, operators were focused on keeping what few staff members they had. Now that hiring is making a rebound, the focus is shifting to attracting and retaining top talent. The leading retention angle for operators? Employee wages. With US restaurant workers making over 70% of their wages in tips, instant access to tips can provide a competitive edge against other employers, playing a critical role in retention. When employees get their tips at the end of the week or month, it takes longer for them to feel rewarded, which makes it less motivating to work hard and stay in the role.

 

¹Food Delivery Platforms Adopt the Restaurant Industry’s Worst Practice: Low Wages & Tipping
²For full service restaurants, according to Square
³ According to a 2022 TD Bank survey

That’s where the support of a digital tip payment solution comes into play. If you’ve made the decision to focus on employee retention with the help of one, you’re in the right place. Here’s everything you need to know to prepare for a smooth transition.

Choosing the right platform for your restaurant

If you’ve already chosen your platform, great job! If you haven’t, how do you know you’re picking the right one for your restaurant’s needs? It all starts with research. Although it takes time upfront, this step is critical for long-term success.

Make sure to consider these key factors from both the administrative and employee perspective:

Pricing

Consider whether the platform charges a flat fee (monthly or annual), a percentage of tips, or a combination of both. Additionally, be aware of any transaction fees and if there’s an option for the restaurant or employee to take on those fees. Check what’s in your budget, including a cost-benefit analysis.

Security and compliance

Any time banking information is involved, the protection of your restaurant and employee data is paramount. Verify that the platform adheres to industry-standard security measures like data encryption, backups and disaster recovery, and 2-step verification.

Reporting and tracking

These capabilities allow managers to analyze tip distributions, identify trends, and generate comprehensive reports for internal auditing and tax purposes—all without having to make their own spreadsheets. An accurate paper trail you can pull up with a few clicks ensures you’re ready when Uncle Sam comes knocking (or a disgruntled employee).

Customer support

Evaluate the level of customer support offered by the platform. Are you required to set up the software solution alone, or will they help? Do they have customer support on the evenings and weekends? Ensure they offer timely and responsive assistance to support you during the transition and beyond.

Reputation and reviews

Do your due diligence. Research the platform’s standing in the market and seek out reviews or testimonials from other operators. This can provide valuable insights into the platform’s reliability, user experience, and shortcomings. Sites like G2 and Capterra are a place to start, offering millions of verified software reviews.

 

An example of a software review on Capterra

Integration capabilities

Consider the platform’s compatibility with your current tech stack to better streamline automation. Implementing new operations should make your life easier, not harder. If you use an all-in-one platform like 7shifts, you won’t have to integrate with other platforms.

 

7shifts tools manage the full restaurant employee lifecycle

Establishing policies

The best way to make the implementation transition as smooth as possible is to get ahead of concerns with clear policies and timelines in place. Establishing well-defined staff policies for using digital tip distribution software ensures employees know what to expect before implementation. Only you know what policies work best for your restaurant, but here are some examples:

1. 1. Confidentiality policy emphasizes the efforts your restaurant and the platform are taking to maintain the confidentiality of employee tip and bank information. Be transparent about who has access to this information, the security measures in place, and data privacy policies.

Example: Protecting the confidentiality of employee tip and bank information is a top priority at [Restaurant Name]. We maintain strict controls over access to this data, limiting it to authorized personnel only. [Platform Name] employs [Security Measures] and complies with data privacy policies to safeguard sensitive information.

2. 2. Training policy states the expectations and responsibilities of restaurant owners, managers, and employees in relation to the digital tip payout process.

Example: Training sessions will be provided to ensure everyone at [Restaurant Name] is well-versed in sending and receiving digital tip payouts. Training for managers will commence [X Date] and everyone else on [X Date]. [Resources Types] will be provided and onboarding must be completed by [X Date].

3. 3. Tip distribution policy establishes the cadence staff can expect to receive their tips. Do you plan on sending employee tips at the end of every day, other day, or twice a week? This could be a significant change for employees used to receiving tips via payroll every two weeks, and will likely be exciting for them!

Example: Starting from [Date], employees can expect to receive their tips digitally every [Cadence] instead of [Previous Cadence][Previous Method].

 

 

4. 4. Dispute resolution policy outlines a straightforward process for employees to voice their concerns or discrepancies and the protocol for addressing and resolving them.

Example: At [Restaurant Name], we value open communication and encourage employees to voice any concerns or discrepancies regarding their tips. If an employee has an issue, they should [Relevant Action].

5. 5. System monitoring and auditing policy outlines how often transaction logs, reports, and any other relevant data will be checked for anomalies.

Example: Regular monitoring and auditing of the digital tip payouts will be conducted. Transaction logs, reports, and relevant data will be checked for anomalies on a [daily/weekly/monthly] basis.

Communicating with your team

Change can be scary for employees, and they’re going to have questions. Transparency, honesty, and open dialogue are key to garnering support. Consider organizing in-person or virtual meetings to discuss the implementation process in detail. This allows for one-on-one interaction where tipped employees can express their thoughts, concerns, and suggestions.

Start by educating your employees about why this change is taking place and the thought you’ve taken before getting to this stage. Next, explain the benefits of digital tip payouts for employees. Clearly highlighting the advantages they can expect, like faster and more accurate payments, goes a long way to help staff understand why you’re not just rocking the boat for no reason. Emphasize how the new system reduces the need for cash tip out handling and minimizes the risk of human errors and discrepancies.

Don’t shy away from addressing tough questions like transaction fees and data security. Be transparent and be ready with detailed information to help overcome objections. You don’t want to sound like you haven’t considered the implications that affect employees.

Next, share implementation timelines. You’ll want to include:

• When can employees expect to receive invitations to the platform
• When employees need to complete onboarding
• When employees will start to receive tips digitally

Share relevant resources, guides, or training materials and encourage open dialogue for employees to ask questions or seek clarification.

Remember, effective communication is a two-way process. Encourage feedback from your team and actively listen to their input. This will not only make employees feel valued but also provide valued insights and suggestions for improvement.

 

 

Staff training

To support the onboarding process, provide employees with clear setup instructions and ample completion time. Reach out to the digital payment platform and ask for a list of supportive materials or resources like instructional videos, user guides, or FAQs to share with your staff. These materials will reduce questions and enable them to familiarize themselves with the platform and its features on their own time.

Conduct training sessions for restaurant managers specifically focused on how to send tips digitally. While most platforms are user-friendly, a live demo with a rep or going through the product together will boost confidence and aid in the transition.

Remember to adapt your training approach to accommodate different learning styles. Some employees prefer hands-on demos, while others benefit from written instructions or interactive training materials. A variety of training resources ensures that you cater to different learning needs and maximize the effectiveness of the training process.

 

 

Launch day

Get excited, it’s the big day! Since you’ve prepared, it should mostly go off without a hitch. As an operator, you’re there to guide, create a positive environment, and troubleshoot if need be. Be a support for managers the first time they send their first digital tip payout, and be a cheerleader for restaurant employees receiving their first digital tip payout. Have the platform’s Customer Service contact information handy and be the leader your team needs.

Checking in

You’ve made it through the implementation—now it’s time to analyze how it all went. Conducting a retrospective is a valuable practice any time you implement something new in your restaurant. You’ll learn what worked, what didn’t, and how you can do better in the future.

Gather feedback

Reach out to your staff and collect their feedback on the new digital tip payout process and provided training. Encourage them to share their experiences, challenges, and suggestions so that you can gain valuable insights into the strengths and weaknesses of the new process. Not getting the engagement you hoped for? Consider using anonymous surveys to encourage honesty or hosting a contest to boost response numbers.

Assess efficiency and accuracy

Evaluate the efficiency and accuracy of the digital tip payout process compared to the previous system. Think about the speed and accuracy of payments and overall ease of use.

Check compliance and legal requirements

Ensure the digital tip payout process remains compliant with legal and regulatory requirements, including tax reporting and recordkeeping. Do your due diligence to review the accuracy and completeness of the generated reports, ensuring they align with the necessary obligations.

Address issues and make improvements

Based on the feedback gathered, address areas of improvement internally or collaborate with the digital payment platform provider to resolve technical or operational challenges.

Keep the conversation going

It’s essential to offer ongoing support after the implementation process to ensure your employees feel comfortable and confident with the change. Encourage them to ask questions and seek clarification whenever needed, and establish a designated point of contact within your restaurant who can help and resolve issues. After a few weeks when managers see how much time they get back in their day, and when staff members receive their tips promptly in their bank accounts, you’ll be able to classify the adoption of a new technology in your restaurant as a success.