This explains the general rules, not legal or tax advice. Tip law varies by state and by how you pay your staff. Before setting a tip policy — especially a required tip pool — check with an employment attorney or CPA who knows your state.
Tip splitting vs. tip pooling
The two terms get used interchangeably, but they're different things:
- Tip splitting is dividing one client's tip between the people who served that client. A color stylist and a cutting stylist share the tip on the ticket they both worked.
- Tip pooling is collecting tips from everyone, over a shift or a week, and redistributing them by a formula. Less common in salons, and it's where most of the legal rules apply.
Most salons only need tip splitting. If you're considering a pool, read the section on who can share before you set one up.
Four ways to split a tip — and when each fits
Take one ticket: a client gets a $150 color from one stylist and a $50 cut from another, and tips $40.
| Method | Color stylist | Cut stylist | Fits when |
|---|---|---|---|
| By service amount | $30 | $10 | Services differ a lot in price and effort — the most common default |
| Evenly | $20 | $20 | Two stylists do roughly equal work, or the team prefers simplicity |
| By time spent | depends on minutes | depends on minutes | Services are priced similarly but take very different time |
| By team agreement | as agreed | as agreed | A stable team that's settled its own rule |
By service amount is the fairest default for most salons, because price is already your best measure of the work involved. A $150 color took more time and skill than a $50 cut, and splitting by amount reflects that automatically. It's also the default in SupaDay's POS, so nobody does the math by hand.
Leave products out. If the same client also buys a $30 shampoo, the tip is still split on the $200 in services. Clients tip on the service, not on retail, and including products gives a share of the tip to whoever rang up the bottle.
The method matters less than consistency. The arguments start when the split changes depending on who's at the front desk or how the day went.
Who can share in the tips?
This is where salons most often get tip policy wrong.
Stylists who serve the client: yes. This is the normal case.
Shampoo assistants and front desk staff: it depends on how you pay them. Under federal law, they can be included in a required tip pool only if you pay them the full minimum wage without taking a tip credit. If your salon takes a tip credit — paying a lower cash wage and counting tips toward minimum wage — the pool can include only employees who customarily receive tips. Stylists are always free to share voluntarily with an assistant who helped them.
Owners, managers, and supervisors: generally no. Since 2018, federal law bars employers — including managers and supervisors — from keeping employees' tips, whether or not the salon uses a tip credit. That also means they can't be part of a required tip pool.
The narrow exception is a tip a client gives directly to a manager or owner for a service they performed entirely on their own. An owner who does a full service on a client keeps that client's tip. An owner who assisted on someone else's ticket doesn't take a share of it.
Several states add stricter rules on top of federal law, including some that ban tip credits altogether. Your state's rule is the one you have to meet.
Card tips: fees and payday
Two rules catch salons by surprise:
Card processing fees. Federal law lets an employer deduct the actual processing percentage from a tip paid by card — a 3% fee on a $40 tip means a $1.20 deduction — as long as the employee still earns at least minimum wage. Some states prohibit this entirely. California, for example, requires card tips to be paid in full with no deduction for processing fees. Deducting fees is optional; many salons simply absorb them.
Timing. Card tips have to be paid to the employee no later than the next regular payday. Holding them longer — waiting for the card payment to settle, or batching them monthly — isn't allowed under federal rules.
Cash tips: write them down
Cash tips are the ones that go missing from the records. A stylist who's handed $20 in cash is still earning tip income, and it still has to be reported for taxes. Under IRS rules, employees who receive $20 or more in tips in a month must report them to the employer.
The simplest habit is to record cash tips at checkout, right alongside card tips, so every stylist's total is in one place when payroll runs.
Put your tip policy in writing
A one-page policy prevents most tip arguments. Cover:
- How shared tickets are split — by service amount, evenly, by time, or by agreement.
- Whether products count (they shouldn't).
- Who's included — stylists only, or assistants too, and on what terms.
- How card tips are paid — on which payday, and whether any processing fee is deducted.
- How cash tips are recorded.
- Who can change a split after checkout, and how disputes get settled.
Give every new hire a copy, and have them sign it.
How SupaDay handles tip splitting
At checkout, SupaDay's POS splits each tip by service amount automatically, and leaves products out of the calculation. If you prefer, tap Split Evenly, or type in custom amounts for each stylist — at the front desk or right on the card terminal screen.
Every tip is saved to the right stylist and marked as card or cash, then flows into commission tracking, which reports each stylist's commission and tips side by side for any pay period. If a service is refunded, the report reduces that stylist's commission and tip proportionally.
For what to look for in a POS more broadly, see what to look for in a salon POS system.
The bottom line
Split shared tips by service amount unless your team has a good reason to do otherwise, keep products out of it, and apply the same rule every time. Owners and managers stay out of employees' tips, card tips get paid by the next payday, and cash tips get recorded like any other income.
Get it in writing once, and tip day stops being argument day. See how SupaDay handles tips at checkout →
