Calculating the Amount to Allocate

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The amount to allocate to an eligible employee for a given pay period is equal to the result of the following calculation:

Amount of tippable sales allocated to an employee × Allocation rate Tips on tippable sales:

If the result is zero or negative, you do not have to allocate any tips to the employee for the pay period.

The amount allocated must be included in the employee's pay for the period. However, if you do not have enough time or if you are missing some of the necessary information when you prepare the employee's pay for the period, you can include it in their pay for the next period.

Example 1

During a pay period, an employee makes $2,000 in tippable sales. You did not distribute any mandatory service charges to them, and the tip allocation rate is 8%. The employee gave you Part 2 of form TP-1019.4-V, Register and Statement of Tips, at the end of the period. It contained the following amounts:

Tips on tippable sales

 

1

$90

Other tips received

+

2

$5

Tips received from other employees

+

3

$15

Tips remitted to other employees

-

4

$10

Net tips

=

5

$100

The calculation is:
($2,000 x 8%) – ($90 +$0) = $70

You must therefore allocate $70 in tips to the employee for the pay period.

Example 2

During a pay period, an employee makes $1,000 in tippable sales. You did not distribute any mandatory service charges to them, and the tip allocation rate is 8%. The employee gave you Part 2 of form TP-1019.4-V, Register and Statement of Tips, at the end of the period. It contained the following amounts:

Tips on tippable sales

 

1

$150

Other tips received

+

2

$5

Tips received from other employees

+

3

$15

Tips remitted to other employees

-

4

$90

Net tips

=

5

$80

The calculation is:
($1,000 x 8%) – ($150 +$0) = –$70

Because the result is negative, you do not have to allocate any tips to the employee for the pay period.

Example 3

During a pay period, an employee makes $4,000 in tippable sales. You gave them $30 in tips from mandatory service charges, and the tip allocation rate is 8%. The employee gave you Part 2 of form TP-1019.4-V, Register and Statement of Tips, at the end of the period. It contained the following amounts:

Tips on tippable sales

 

1

$150

Other tips received

+

2

$5

Tips received from other employees

+

3

$15

Tips remitted to other employees

-

4

$10

Net tips

=

5

$160

The calculation is:
($4,000 x 8%) – ($150 +$30) = $140

You must therefore allocate $140 in tips to the employee for the pay period.

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