Tips and tip pools at Newfoundland and Labrador restaurants: keeping it fair and legal

For servers, bartenders and many cooks in St. John's, tips are a large part of what they take home, especially in the busy summer months. That makes how tips are handled one of the most sensitive topics in any restaurant. Get it right and the team trusts you. Get it wrong and good people leave, or worse, file a complaint.

Who owns tips in Newfoundland and Labrador?

This is general information, not legal advice, so check the current Labour Standards Act or ask the Labour Standards Division.

In Newfoundland and Labrador, the Labour Standards Act says tips and gratuities are the property of the employee to whom or for whom they are given, and that an employee must not be required to share a tip with an employer, a manager or supervisor of the employee or an employer's representative. A few points follow:

• No lower minimum wage for tipped staff. Servers must be paid at least the minimum wage, and tips come on top.
• The owner cannot take a share of tips for the business.
• A charge collected in place of a tip is treated as a tip, which matters if you add an automatic gratuity for large groups.
• Deductions are limited. Where a surcharge is paid instead of a tip, or the tip is itemized on a card payment record, the Act lets you deduct only what an Act of the province or of Canada requires to be deducted from income.

Can a restaurant run a tip pool?

Tip pools, where tips are shared among the team, are common. The Act does not mention pools. Because it treats tips as the employee's property, ask the Labour Standards Division whether your pool design fits before you start it, particularly if anyone who supervises would take part. Pay stays at or above the minimum wage whatever the pool pays out.

If you run a pool, write the rules down:

1. Who is in the pool (servers, bartenders, bussers, cooks, dishwashers)
2. How it is split (by hours worked, by role or by a points system)
3. How often it is paid out
4. How card tips are handled, including when they reach staff

Share the rules with everybody, and apply them the same way every time.

How are tips calculated on a bill with HST?

Newfoundland and Labrador's HST is 15 percent, which adds a noticeable amount to the bill. Many diners in Canada tip on the amount before tax, and some prefer a card terminal that suggests tips on the pre-tax amount. Outside Quebec this is a choice rather than a rule, but customers notice and appreciate it. Check how your card terminal calculates its suggested tips. The guide on GST/HST on tips and service charges covers the tax side.

What about automatic gratuities for large groups?

Many restaurants add an automatic gratuity to tables above a certain size. If you do:

• Tell the guests before they order, on the menu or when they book.
• Treat it as a tip, paid to staff like any other tip.
• Do not call it a service charge and keep it for the business.

Why do records matter for tips?

Clear records protect everybody. They show staff that the pool is fair, and they show you what was paid if a question ever comes up. Keep:

• Timesheets of hours actually worked, which many pools use to split tips
• A record of each payout, with who got what
• Card tips recorded on each sale, so the total is not a guess

Asking each staff member to identify themselves when they ring a sale records who served whom. That is about attribution, not security: roles decide who can do what.

How do tips change between summer and winter?

In St. John's the gap can be large. A summer weekend with a full patio and a cruise ship in port can bring in more tips in a night than a quiet week in February. A pool that is split by hours worked handles that fairly, because everybody's share rises and falls with the room. Be careful with any rule that favours seniority or particular shifts: it can feel fair in winter and very unfair in July, or the other way round.

How often should tips be paid out?

Choose a schedule, write it down and stick to it.

• Set a fixed schedule, such as with each pay period.
• Show the calculation: the pool total, each person's hours or points and their share.
• Record every payout, with the date, amount and recipient.
• Treat card tips consistently, and ask your payroll provider or accountant how to report them.

Summer tips can be several times winter tips in a tourist city, so a clear, consistent method matters even more when the amounts swing.

What should you do if you are unsure about your tip policy?

Ask. The Labour Standards Division can answer questions about the rules, and an employment lawyer or your accountant can review a written policy. It costs far less to check a policy than to fix one after a complaint. Talk to staff openly too: explain the rules when someone starts, answer questions straight away and show the numbers if anyone asks. A tip pool that people understand is one they trust, and trust keeps staff through the long winter as well as the busy summer.

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More in the Canadian guides for food businesses.