Tip Allocation Service

Setting Up Tip Allocation

Before using tip allocation you must set up the appropriate earning codes and the tip allocation service. You must also make sure the correct earnings are coded as "Worked" time and that the employees are coded as directly or indirectly tipped.

When setting up tips for your company, please also ensure that you are following the guidelines outlined in the OBBB & Secure 2.0 Setup article.

Earning Codes needed for Tip Allocation

• Gross Receipts — You will need an earning with type MemoGrsRecpt to enter gross receipts information.

• Tips — You will need earnings with types Cash Tips and Charged Tips to enter tip information.

  note

  Earning type "Banquet Tips" is NOT used by the tip allocation calculation.

• Tip Allocation — You will need an earning with type MemoTipAlloc that ReadyPay will use to post all allocated tips. If you do not set up a code, ReadyPay will automatically add one (TipAl) when the tip allocation calculation is performed.

Coding of Worked Earnings

The tip allocation needs to get the total worked hours for an employee. To do this we look at the "Worked" setting on all earning codes. We include all earnings with the "Worked" box checked in our calculation of total hours.

Coding of Employees

ReadyPay will read tip amounts from all employees coded as either directly tipped "D" or indirectly tipped "I". ReadyPay will also only allocate tips to directly tipped "D" employees. You can set an employee as directly or indirectly tipped using the "Tipped?" setting on the Status/Position Tab. An example of a directly tipped employee is a waiter who gets a tip from a customer. An indirectly tipped employee is a bus boy. He receives his tips from the waiters/waitresses.

note

You should check to make sure this setting is correct on all employees before using tip allocation.

The Tip Allocation Service

You will need to add the tip allocation service "TipAlloc" to the services tab located under Master Company Setup.

The service has 2 different service levels:

• Manual — If the service is set to this level, no tip allocation will be performed by ReadyPay.
• Calculated — If the service is set to this level, ReadyPay will calculate and post tip allocation.

The service also has several configuration properties:

• Tip Allocation Rate — This is the rate that will be used when performing all of the tip allocation calculations. This rate is entered as a decimal so 8% should be entered as 0.08.
• Recalculate Voids — When ReadyPay sees a Reversal check in the current payroll it will automatically recalculate tip allocation for the payroll containing the check that is being voided. It will post additional entries to the original payroll to correctly represent the recalculated allocation. If you do not want ReadyPay to Recalculate the old payrolls, uncheck the "Recalculate Voids" check box.
• Tip Allocation Method — This defines how ReadyPay determines the proportion of allocated tips to give to an employee. If Worked Hours is selected, ReadyPay will look at the proportion ee worked hours/total worked hours to determine the employee's allocation. If Individual Gross Receipts is selected, ReadyPay will look at the proportion ee gross receipts/total gross receipts to determine the employee's allocation. The worked hours method is typically only allowed for small companies.

Calculating The Allocation

ReadyPay will perform the tip allocation calculation automatically on a payroll during processing (as long as the service is set up and has a service level of Calculated). ReadyPay will post the memo allocation earning code to all employees who need to receive allocated tips.

If ReadyPay encounters a Reversal check in the current payroll, it will automatically go back and recalculate the old payroll that contains the check being voided. It will update the allocation amounts on the old payroll to account for the voided check.

The allocation amounts can be viewed on any post-processing report that displays payroll history data (Register, Labor, etc.). They can also be viewed on the new hard coded Tip Allocation Report (MPI_0504). This report will display all of the allocation for the current period and it will also display the allocation for any older periods that were recalculated.

note

The allocation amounts are calculated by ReadyPay after the employee checks are created and will NOT appear on any pre-process reports.

Manually Calculating Tip Allocation using same process ReadyPay Uses

The following is the logic that ReadyPay uses to calculate Tip Allocation. If you have any questions with the results, please refer to the formulas below to confirm results.

Terms used within Formula:

• Directly Tipped Employees = An employee with "D" selected in the tipped? field.
• Indirectly Tipped Employees = An employee with "I" selected in the tipped? field.
• Gross Receipts = Earnings with the earning type set to MemoGrsRecpt.
• Actual Checks = Any check except voids/reversals and nocalcs.
• Tip Earnings = Earnings with earning type Cash Tips or Charged Tips.
• Worked Earnings = Earnings with the worked box checked.
• Tip Rate = Tip allocation rate specified on the tip allocation service. By default this is 8% or .08.
• Tip Allocation Method = Method specified on the Tip Allocation Service. Either Worked Hours or Individual Gross Receipts.

Calculation Method

If your Tip Allocation Method is Individual Gross Receipts, follow these steps to figure out manually what your Allocated Tips should equal:

• Calculate Total Gross Receipts (GR) by summing up all Gross Receipts from all Actual Checks for all Directly Tipped Employees and Indirectly Tipped Employees.
• Calculate Total Direct Tips (TD) by summing up all Tip Earnings from all Actual Checks for all Directly Tipped Employees.
• Calculate Total Indirect Tips (TI) by summing up all Tip Earnings from all Actual Checks for all Indirectly Tipped Employees.
• Calculate Total Company Shortfall (CS) as (GR x Tip Rate) - (TD + TI). If CS is less than or equal to 0.00, no Tip Allocation is performed.
• Calculate Total Allocation (TA) as GR x Tip Rate.
• For each Directly Tipped Employee, do the following:
  • Calculate the Employee Gross Receipts (EGR) by summing up all Gross Receipts from all Actual Checks for the employee.
  • Calculate the Employee Tips (ET) by summing all Tip Earnings from all Actual Checks for the employee.
  • Determine the Employee Shortfall (ES): ES = (TA x (EGR / GR)) - ET. If ES is less than 0.00, set it equal to 0.
• Calculate Total Employee Shortfall (TES) by adding together the ES for each employee.
• For each Directly Tipped Employee, calculate Tip Allocation for the employee = CS x (ES / TES).

If your Tip Allocation Method is Worked Hours, follow these steps to figure out manually what your Allocated Tips should equal:

• Calculate Total Gross Receipts (GR) by summing up all Gross Receipts from all Actual Checks for all Directly Tipped Employees and Indirectly Tipped Employees.
• Calculate Total Hours (TH) by summing all Worked Earnings from all Actual Checks for all Directly Tipped Employees.
• Calculate Total Direct Tips (TD) by summing up all Tip Earnings from all Actual Checks for all Directly Tipped Employees.
• Calculate Total Indirect Tips (TI) by summing up all Tip Earnings from all Actual Checks for all Indirectly Tipped Employees.
• Calculate Total Company Shortfall (CS) as (GR x Tip Rate) - (TD + TI). If CS is less than or equal to 0.00, no Tip Allocation is performed.
• Calculate Total Allocation (TA) as GR x Tip Rate.
• For each Directly Tipped Employee, do the following:
  • Calculate the Employee Gross Receipts (EGR) by summing up all Gross Receipts from all Actual Checks for the employee.
  • Calculate the Employee Total Hours (ETH) by summing all Worked Earnings from all Actual Checks for the employee.
  • Calculate the Employee Tips (ET) by summing all Tip Earnings from all Actual Checks for the employee.
  • Determine the Employee Shortfall (ES): ES = (TA x (ETH / TH)) - ET. If ES is less than 0.00, set it equal to 0.
• Calculate Total Employee Shortfall (TES) by adding together the ES for each employee.
• For each Directly Tipped Employee, calculate Tip Allocation for the employee = CS x (ES / TES).