Gratuity and Service Charges

Simplify gratuity management by automating calculations based on your restaurant’s policies.

Settings Overview:

• Mandatory Gratuity: Enable automatic gratuity for qualifying orders.
• Minimum Guests for Gratuity: Specify the minimum number of guests required before gratuity is applied.
• Include Tax in Gratuity Calculation: Choose whether to calculate gratuity on the subtotal or total.
• Exclude Discounts: Define if gratuity should apply before or after discounts are factored in.

What is a Gratuity?

A gratuity is a service charge added to a customer's bill. It can be a flat dollar amount or a percentage of the pretax or post-tax check total. Gratuities can be added manually by an employee or automatically based on the number of guests in a party.

Gratuity vs. Tips

Per the IRS, the distinction between a tip and a service charge is based on specific factors:

• Tips:

  • The customer determines the amount.
  • The payment is not subject to employer policy or negotiation.
  • The customer decides who receives the payment.

  Typical forms of tips include:

  • Cash given directly by the customer.
  • Payments made through electronic settlement (credit, debit, gift card).
  • Payments shared among employees through tip pools or tip-sharing arrangements.

How to Report Tips

Employees must report all cash tips to their employer, usually at the end of their shift before clocking out. All cash and non-cash tips are included in the employee's gross income and are subject to federal income taxes. (Ref: IRS)

Service Charges

A service charge, including gratuities automatically added to a customer's check, is considered a "wage" under federal law. Examples of service charges include:

• Automatic or added gratuity (line item on the receipt)
• Bottle service charges
• Banquet event or private room rental fees
• Delivery fees
• Table rentals (nightclubs/bars)

How to Report Service Charges

Service charges are treated as wages and reported as non-sales revenue. If the restaurant does not withhold tips for payroll, the service charges collected are payable to the employee at the end of the shift, similar to credit card tips.

Gratuity vs. Service Charge

While a gratuity is a type of service charge, gratuities typically go to the employee, whereas other service charges go to the restaurant.

Setting Up Gratuity in MicroSale

Before using gratuities in your restaurant, they must be set up in the POS system. You can either program this yourself or contact your MicroSale representative for assistance.

1. Access the Gratuity Settings:

   • Go to Managers Menu -> Discounts, Gratuity Maintenance

To create gratuities, you only need to focus on the top left area of the screen. All other components are used for creating qualifiers for special discounts.

Programming a Gratuity:

• • Enter a descriptive name for the gratuity. This name will be displayed on the customer's bill.
  • Choose the type of gratuity from the dropdown menu:
    • Gratuity: Set a fixed percentage in the Amount field.
    • Open Gratuity: Prompt the user to enter a percentage.
    • Open Gratuity Amount: Prompt the user to enter a flat dollar amount.
  • For consistent control, use the "Gratuity" type with set percentages (e.g., 15%, 18%, 20%).

• Set Gratuity Amount:

  • Enter the gratuity percentage amount. You can set this on net sales or pre-discounted totals.

• Assign Access Level:

  • Choose who can add this gratuity to a check. For general access, choose a low level like Cook. For manager-only access, choose Manager or Supervisor.

• Select Category:

  • Choose "Gratuity" as the category to ensure proper reporting and placement of the button.

• Save the Settings:

  • Click Save to finalize the setup.

Calculating Gratuity

By default, gratuity is calculated on the pre-discounted and pre-taxed total of the check (Gross Sales). Alternatively, you can calculate gratuity on the total after discounts have been applied (Pretaxed).

1. Change Gratuity Calculation:
   • Go to Managers Menu > Register Setup > Terminal Configuration > Register Options > Full Service.
   • Choose how gratuity is calculated:
     • Gross: Pretaxed, pre-discounted total.
     • Net: After tax, pre-discounted total.
     • Discounted: Pretaxed, post-discounted total.
   • Save the changes.

Automatic Gratuity

To apply gratuity automatically based on the number of guests:

1. Enable Automatic Gratuity:
   • Select Enable automatic gratuity and choose the number of guests required to trigger the gratuity.
   • The gratuity will prompt when “Print Check” is selected if the number of guests is met.

If the number in party requirements are met, the gratuity will prompt when “Print Check” is selected.

Holding Gratuity for Payroll

By default, the gratuity service charge is passed to the employee at the end of their shift. Some states require gratuity service charges to be held for payroll. To hold the gratuity amount and add it to the employee's paycheck:

1. Select "Hold Gratuity for Payroll":
   • Set this option to "Yes".

Adding the Gratuity Button

To apply gratuity to a check, you need to add the gratuity button to your system.

1. Add the Gratuity Button:
   • Go to Managers Menu > Register Setup > Terminal Configuration > Edit Order Screen Buttons.
   • Find Gratuity in the list and add it to an unoccupied button by clicking on the option text and then clicking on an empty button.
   • If all buttons are occupied, replace one by double-clicking on it and assigning the Gratuity function.
   • Save and exit

Applying Manual Gratuity

1. From the Order Screen:
   • Select Gratuity.
   • Choose the appropriate gratuity amount.
   • The gratuity will appear on the check.

Automatic Gratuity on Every Check

To add gratuity to all checks regardless of party size:

1. Set Number in Party to 1:
   • This ensures gratuity is added to every check.

In quick bar setup (tabs instead of tables), gratuity is added when you select Pay Order or start a tab.

For further assistance, visit MicroSale Gratuity Service Charge Article.