# Who Owns the Tips at a Salon or Restaurant?

The employees who earn them. An owner or manager can't keep any of it — and card fees have limits.

Under federal law an employer, including managers and supervisors, may not keep employees' tips, whether or not it takes a tip credit. Tips can be pooled among employees under specific rules on who may take part, and an employer may pass on card processing fees only up to what the card company actually charged, never below the minimum wage, and paid by the regular payday.

Work out your own number with the free [Commission minimum wage calculator](https://rulecost.com/paycheck/commission-minimum-wage-calculator/).

Tips are the employee's money. The federal law says an employer "may not keep tips received by its
employees for any purposes, including allowing managers or supervisors to keep any portion of
employees' tips, regardless of whether or not the employer takes a tip credit." That one sentence
settles most disputes about owners taking a cut.

## Pooling: who can be in it

Employees can be required to share tips in a pool, but the rules differ depending on the pay
arrangement:

- **With a tip credit**, the pool is limited to employees in jobs that customarily and regularly
  receive tips — stylists, technicians and servers, not the receptionist or the back office.
- **With the full minimum wage paid in cash**, the employer may include staff who aren't normally
  tipped in a mandatory pool.
- **In both cases**, no owner or manager may take part.

The federal rules don't dictate a formula. Splitting by hours worked is common and easy to check.
Try it in the [tip pool calculator](/paycheck/tip-pool-calculator/).

## What a manager can keep

A manager or supervisor may keep a tip a customer gave them directly for service they personally and
solely provided, and may put their own tips into a pool. They can't take money from the pool, or from
tips earned through work done jointly with other employees. "Manager" is a duties test, and it can
include a business owner with a meaningful ownership stake who runs the business.

## Card fees

When a customer tips by card, the employer pays a processing fee. Federal guidance says the employer
may reduce the tip by no more than the fee the card company actually charged — paying out 97% when the
fee is 3% — and only if that doesn't push the employee's pay below the minimum wage. The money is due
by the regular payday, not held until the card company pays out. Some states don't allow the
deduction at all, and where state and federal rules differ, the more protective one applies.

## Tips and taxes

Being tipped in a job that appears on Treasury's list may also qualify for a federal deduction; see
[which jobs qualify for no tax on tips](/guides/which-jobs-qualify-for-no-tax-on-tips/).

## Sources

- [29 U.S.C. §203(m)(2)](https://www.law.cornell.edu/uscode/text/29/203), Cornell Law School LII
- [Fact Sheet #15: Tipped Employees](https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa), U.S. Department of Labor
- [Fact Sheet #15B: Managers and Supervisors and Tips](https://www.dol.gov/agencies/whd/fact-sheets/15b-managers-supervisors-tips-flsa), U.S. Department of Labor