Updates to Square Payroll tip distribution?

[dkhtodd]

I was looking at the new SHIFTS section this morning and happened upon SHIFTS>Settings>Tip Distribution. I noticed that TIP DIRECTLY (Credit cards tips are attributed to the team member who collected the tip) was selected. This confused me because I don't ever recall setting that or telling the system to only give tips to the person who collected. When we set this up a year ago, tips were set to be pooled.

I continued looking around and noticed under PAYROLL>Settings>Payroll Settings that Enable Tip Importing is selected as is Pool & Split tips. This section makes sense to me and I recall seeing this before. This is how the tips should work.

My question is, which section is correct? If SHIFTS is correct, it seems as if the person who is on the register will receive the credit card tips - but that is not how I expected this to work.

Attaching screenshots for reference.

Please advise.

 

The title of this thread has been edited from the original: New SHIFTS: Did something change with Tip Distribution?

[#2]

Hi all, back again as promised with an update. First off, thank you for sharing your feedback on how the recent tip splitting changes impact your business. Our teams have heard you, and understand that having more flexibility with tip calculations is important for both business operations and employee satisfaction.

To address these concerns, we will make the following changes:

• Existing Square Payroll customers will be able to pool and split tips by workday or pay period until April 1, 2022 (extended from December 1, 2021). After April 1st, customers will have 3 options: [1] pay tips directly, [2] split tips by transaction, or [3] pool and split tips by workday.
  
  
• We will expand the existing pool and split by workday option so it is available for non-Payroll sellers. Currently, sellers who don’t use Square Payroll are unable to pool and split tips by workday. After this update, they will be able to download reports that they can upload to their existing payroll providers. 
  
  
• Once the grace period ends on April 1, 2022, the option to pool and split tips by pay period will be removed. We are working to consolidate and expand labor-related functionality within Square, and as we do so we are unable to continue supporting tip pooling and splitting by pay period. We understand this may disappoint some businesses and hope the ability to pool and split tips by workday may work as an alternative. 

Employers were not opted into the new tip splitting method automatically.

If you would like to confirm your settings and continue using the Workday/Pay Period option, follow these steps: 

1. Go to Payroll > Payroll Settings. If you still see the old settings, you are all set!
   
2. If you no longer see the Pay Period or Workday options, like the screenshot below, you may have inadvertently opted into the new tip splitting method:
   
3. If this was a mistake, and you want to switch back to Workday or Pay Period, follow these steps:
   
   Go to Shifts > Settings > Tip distribution and choose Tip directly.
   
   NOTE: You will not actually tip directly. On the next step, you will be prompted to select your actual preferred tip distribution method. This is a temporary workflow during the grace period.
   
   Return to Payroll > Payroll Settings. You will see the old Workday/Pay Period options and select your preferred method.

For those who would like to use the new feature to split tips per transaction, but have hours of operation when no one is clocked in, we wanted to highlight that you have the ability to toggle on or off the “Distribute unattributed tips equally” setting.

If the setting is toggled on, tips received when no one is clocked in will be equally distributed among all tip-eligible team members who clocked in on that workday. If no one clocked in that day, the tips remain unattributed. You can manually apply these tips at the time of processing payroll.

Thank you again for all of your continued support and feedback. We are always looking for better ways to improve our product to support your business and team. 

[#3]

Hi All! I want to thank you for raising your concerns. We completely understand the sentiments here and apologize for the disruption this has caused. We understand the sensitivity with the labor market, and how this impacts your business. We will take this back to our teams and reconsider options.

At a minimum, we can extend the grace period and provide guidance on how to still split tips by workday.  **These options have NOT yet gone away. As long as you don’t select the new “Split by transaction” option in TM, your tip calculations will not be affected.**

I hope to be back soon with some more information on this change today from our teams and give everyone a bit more insight.

[2ndCharter]

@Donnie-M, I'm going to have to agree with @fsalazar on this one. We still have staff working (bakers) on days we are closed. I can see though, it would work for others but not for us.

[Donnie-M]

@2ndCharter @fsalazar That is a good point if you have people working on days there are no tips.  I am looking over the legal ramifications for my state for this exact situation to make sure there wouldn't be a legal reason that if a tip comes in when someone is off a day would that exclude them from the pool for that day.

I will say this, splitting tips by hours worked is absolutely an acceptable and proportional way to set up a tip pool.  I did find that say in New York State, there are some rules where tips can't be split this way based strictly on hours worked.  There is also a legal argument that a tip that is not designated for a particular person is actually a service charge and can be split any way the business wants.  The IRS has a 4 point definition of tip and one of those requirements is the customer can designate who a tip is going to.

So far my research hasn't given a legal reason why the tipping by pay period should not be offered to businesses where it is legal and at the discretion of the business.  I think it would be fair for square to even have a disclaimer signed by sellers that they are responsible for compliance with all tip laws.

@fsalazar One other thing specifically for you, I don't use square payroll, and I do have a spreadsheet with macro that allows you to still get this exact info in less than 2 mins and would only require you to manually input tips when you do payroll.  Depending on the number of employees, I can't imagine running a blind payroll without at least looking at each persons time card for missed clock out/auto clock out/overtime.  I do this to make sure there are no errors and as a checks/balance audit function.  So there is a work around that will take about 5-10 mins total of time, which is valuable, regardless of what square decides to do.  There are also some links to more advanced tip pool/share software if you use points or something other than hours worked.  Some places tip different percentages for BOH vs. FOH vs. Bartenders etc.  Unfortunately, square offers a one size fits most for much of their product line and the entire ecosystem covers this weakness with the huge amount of integration they offer at the price they charge.  Just my 2c.

Donnie-M

[theCdog]

@kellyj   

Thank you for noticing the impact that these changes will have on many businesses. Delaying the change will allow us to continue using Square through the holiday season, and I guess it will give us all some needed time to shop for an alternative CC processor, Payroll provider, POS system, online presence, etc 😭

Can't you see that our small business has put a lot of its eggs in your Square basket? Please reconsider allowing the pooling and splitting of credit card tips by all eligible employees over the pay period to continue. Then our business can continue to use Square.

Regards, Chris

[TGWH]

Thanks for the update! A few questions.

1. When using tip by transaction paired with tipping directly at the end of a shift - how do our employees get their specific tip info at the end of a shift from our Square Register POS?

 - the Team App was suggested earlier but I don’t expect each employee to have a smartphone, or expect each employee to download an app on our behalf. 

2. Can I override tip distribution in real time from my dashboard? (Say there is a party and only one employee is working it, how to avoid the tip being dispersed amongst all eligible employees working during that transaction)

3. We have a salaried employee that doesn’t clock in - to be eligible for tip distribution by transaction, will they need to start clocking in or can I do an automatic opt in for tips on the days they work?

Love the tip by transaction feature, I really hope to be able to implement it!

[drachenfutter66]

Not a fan at all over your new tip dispersement options.  I pay over min wage and my staff all work equally as hard. I have one staff who can only work weekends and is the absolute slowest of my entire time. The busiest time of the week, and she will make bank while everyone else gets their tips cut. I want the old way back of splitting by hours worked in a pay period, the old way my staff were all making over $20/hr and all were extremely happy and working as a team. Your new system has killed that in one pay period!!!! 

[kellyj]

@drachenfutter66 
This option is still available to you until April 1, 2022. We're continuing to look into further options for the future, but please see the answer above so that your current workflow is not disrupted.

[dsaxena_pdx]

It doesn't matter if the option is available until April 2022 if it's going away. I (and probably many others) won't wait around to see if Square decides to keep it or remove so will start looking for new payroll providers. At that point, one of the benefits of using the POS also goes away as it's not all integrated anymore so we may also just start looking at other POS options too.

[JJ_]

We hope to have an alternative in place by April 2022 @dsaxena_pdx. Thank you for your patience.

[theCdog]

Hey JJ (and anyone else listening at Square),

I am wondering if there is an update on tip pooling for all employees across pay periods. As mentioned previously, this is the "make or break" option for our business continuing to use the Square platform. Our business is able manage all other challenges, but this directly affects the pay of our employees & is unacceptable. To reiterate: our retail open hours are just four days a week, however our staff work all seven (production, etc). We share pooled tips among all staff in all departments of our bakery (back & front of house staff). This is an option that has been offered by Square since we began accepting tips, and it is the model our staff & business views as the most equitable & is the method we will continue to use. I remain puzzled by the "why" behind its removal as an option, and believe many other businesses feel similarly. The importance of fair distribution of tip wages, as well as job satisfaction & retention of staff is more important than ever in this challenging time for the industry. 

I appreciate the extension through March 2022, however that is merely delaying the inevitable. I am hopeful that the option for Square Payroll customers to pool and split tips by pay period will remain an option for our small business, and for all the behind the scenes hourly employees that this change will so seriously effect.

This issue is critical. I am open to discussing directly the retention of our business services with Square (incl. website, cc processing, register hardware, payroll services, square capital, integrated insurance, etc.) should you desire.

Regards,

Chris

[JJ_]

@TGWH & @theCdog

These sound like good questions for our Payroll team

They can take a look at your account with you to help shine a light here, as they are able to look at your account alongside you in order to provide alternatives and tailored answers. Please reach out by phone or email when you have a moment by logging into your Square account and heading here.

[theCdog]

JJ, 

Can you help advocate with the Payroll Team for this community? I assure you I have let Square Payroll know my feelings multiple times via phone. This change is bigger than that, and I am not seeking "an alternative" way to process CC Tips for our staff, but rather demanding that Square continue to allow the pooling and splitting of tips across pay periods. It is a major change to the Square platform that will cause me to have to abandon Square as of April 2022. Since we have built our business over the last 6 years -- integrating many pieces under the Square banner, you can understand how upsetting this change may be. It will directly affect the dollars going to our hourly workers. Unacceptable.

Regards, Chris

[fsalazar]

I have to second theCDog's notes - this is a very big issue for us, and I and many others will be extremely disappointed with Square if they choose to move forward with removing this payroll tip distribution option that we are already using. I think many of us tabled this discussion as we were getting through the holidays, but it is front of mind as a critical issue going forward and will impact our future with Square. 

Please relay to the Payroll Team that this is vital to us as an option, and forcing your customers to do additional manual work to make it work would be a big mistake. 

[BernadetteA]

Thank you both for your feedback. We are happy to pass this along to the team for you. 

[fsalazar]

Please advise where Square is at in getting us the tip splitting alternative, as the end of March is going to come up on us very quickly. Many of us are still just confused why you would remove the option that is already there that works, but in any case we need to know whether Square is providing an option that actually works for our needs or if that is not going to be the case, so that we can review alternatives ASAP. 

[MFNC206]

Not acceptable answer. Your customers are demanding this "Tip pooling" policy/ procedural change is left in place. How many executive (task force) meetings do you need to have to resolve this issue? If you think it is bad now, wait until April when you implement the change! -Bruce@MFNC

[lgmbts]

Today, I read an update to this that I believe confirms that I can still pool/split tips by day, and not by shift - and that there is no end date to this method of tip splitting.  Is that in fact the case?

[Donnie-M]

@lgmbts Right now all the options are available at least until april next year.  It is still being looked at and I am sure some more changes will come down the pipe before April.  There are a lot of issues with payroll laws and rules across different states that require the payroll entity to comply differently.

[rattus]

What we'd like to see is tip pooling by the hours, not transaction - otherwise those that open and close get screwed during non-or-low-transaction hours, despite working full tilt. 1 day's FTE share = tips/(total employee-hours/8)* hours that day, per employee.

Clear as mud? 😉

[Donnie-M]

@rattus This is fixed now, you can select tipping by hours worked for the day.  It isn't exactly pay period, but in my use it is pretty darn close and allows people who open or close to fully participate in days tips.

[rattus]

Yeah, just found that, thanks. Odd it wasn't there 2 days ago... 😉

[rattus]

Also, we have occasional off-book employees - like the kid we hired to do a delivery because we're too busy, and that I'll be damned if I file a W-2 or 1099 for. What the customer tips them is a mystery of the sea.