Automating tip pooling can save operators a full 8 hours of labor per week.
The restaurant industry has long had a problem when it comes to attracting and retaining employees. This started prior to the pandemic, but has spiraled exponentially since—it’s widely reported that over 1 million employees left the industry and have not yet returned.
“The labor challenge is an outcome of several shortcomings that the industry has had for a long time,” says Jordan Boesch, founder and CEO of 7shifts, a restaurant management solution that manages an employee’s life cycle with a company, from hiring, to paying, to retaining the employee. “It’s clear the pandemic pushed away a lot of people who took jobs in other industries. I think at its core, the problem is that there are some big pay gaps that need to be addressed surrounding the labor front.”
A recent survey conducted by 7shifts asked nearly 4,000 former restaurant workers why they left during the pandemic, and the results were unambiguous. Workers under the age of 25 identified that, in order, wages, schedule flexibility, and school were the three main reasons they have yet to return to the industry. The same survey found that workers above the age of 25 identified their top three reasons for not returning to be, in order: wages, schedule flexibility, and then manager recognition.
Extra Wages via Tip Pooling
Boesch suggests that restaurants must find new ways of paying their employees more, while also building an inclusive culture that makes employees feel appreciated. He fully understands that this is a challenge, considering the inflation that is now cutting into already-thin margins, but he also says it isn’t impossible. One place where restaurants can easily funnel more money to their team members is via tip pooling.
Tip pooling is a great way to tackle multiple challenges at once. For one, it’s viewed as a more equitable way to distribute tips. It gets rid of the notion that there are “good” and “bad” tables or sections for servers, and more fairly compensates back-of-house staff, where it’s been especially difficult to find and retain employees. Tip pooling helps build a positive culture, Boesch says, which can serve as the foundation for being an employer of choice.
“Restaurant brands that are finding ways to be more operationally equitable are not having the same problem finding and keeping great employees,” Boesch says. “If you look at brands like &Pizza and Union Square Hospitality Group, they can’t keep up with applications coming their way, and part of that is because they’re building a culture, partially by taking the wage gap seriously. I think the best path forward for most restaurants is to try and emulate that behavior.”
Tip Pooling Can Be Time Intensive
One of the traditional drawbacks of tip pooling, however, is that it can be complicated to calculate. With so many moving parts, including hours worked and percentage of tips that are owed to each member of the team, many restaurant managers may have negative associations with the practice. That’s fair—a study by 7shifts found that the average restaurant manager spent 8-to-10 hours calculating tip pooling payouts per week.
“This is a key pain point for those restaurants trying to execute tip pooling,” Boesch says. “It’s inherently difficult to calculate tip pooling.”
The time-consuming nature of tip pooling is something 7shifts set out to solve—the company spent an impressive amount of time and legwork figuring out how to automate the process and roll it into its restaurant management solution. “We spoke with tons of restaurants to understand the ways that they build their tip pool in order to create a solution that would do it for them with the click of a button,” Boesch says. “We really think it solves that key pain point.”
Restaurant operators agree. Daniela Perallon, owner of Canadian’ Bakin, says 7shifts’ tip pooling feature has saved her and her team from conducting a task that used to be a headache. She says the feature “has saved time and mental energy. As a business owner, it’s mostly the mental energy you’re using. I could type in hours incorrectly, or forget to take hours out, which happened a couple of times. It takes away my user error because 7shifts is doing all of the work for us.”
A Holistic Approach
The features offered by 7shifts cover five main pillars: hiring, training, scheduling, paying, and retaining employees. The idea to add a tip pooling feature came naturally for the company, which has historically added features based on feedback it gets from actual restaurant operators. One of those operators, Union Square Hospitality Group’s Danny Meyer, recently led a $21.5 million funding round because he deeply believes in what the 7shifts platform is trying to help operators like himself achieve.
“We rolled this tip pooling feature out last year after we had heard it was a big headache for operators,” Boesch says. “Restaurant operators have so many papercuts that they deal with on an everyday basis. All of those papercuts add up. We’re in the business of helping solve as many of those issues as we can, to be as powerful an asset as we can be to them. That’s the approach we’ve always taken. We have a great history of building products like this to help solve as many pain points as possible.”
For more on tip pooling and the 7shifts platform, visit the company’s website.