How Contactless Payment is Changing Restaurant Tipping

Written by Ashley Dameron

December 10, 2020

On November 17, Netspend in partnership with InfoSync performed a live webinar, “Paying Tipped Workers in a World of Contactless Payments.”  Adam Kujawa, Vice President Sales and Business Development at Netspend, and Josh Bartel, Vice President Web Development InfoSync, discussed hurdles of cash tipping that restaurants are facing and how to help solve them. Here’s the recap.

The Problem with Cash Tipping

With digital ordering, electronic payment, and contactless pickup options on the rise, restaurants have less cash being handled in the store. This creates a problem for employees who rely on daily cash reimbursements for credit card tips and mileage at the end of their shift. In fact, cashless business transactions increased by 23% between March 1 and April 23, 2020.1 Some of InfoSync’s clients saw a 35% increase in credit/debit card sales, a 30-35% increase in sales overall, and up to 25% of restaurant locations started experiencing a cash deficit.2 This cash deficit means that there is not enough cash daily to pay out the credit card tips and/or driver reimbursements each day. So how can restaurants help to solve this challenge?

Some restaurant companies have opted to pay out staff tips and reimbursements on their employees’ paychecks. However, because electronic payments are quickly becoming the preferred way to pay, they are also becoming the preferred way to receive payments. “Employees see that customers are expecting to be able to pay electronically, and they’re wondering ‘When is this going to happen for me?’” says Adam Kujawa. “Employees are expecting companies to move to an electronic payment method, and businesses who tip out in cash need to begin looking at other solutions.”

Having a lack of cash in-store isn’t necessarily a bad problem to have. In fact, having a large amount of cash in-store comes with its own set of risks. Reconciliation can become cumbersome and difficult with paper processes, while inside and outside theft can occur. Managers having to move cash from the drawer to the safe, or physically make bank deposits can potentially affect productivity and create inefficiencies. Use of electronic payments can help mitigate these risks.

Solutions for Tipping Employees

There are several ways to offer electronic payments to employees. The first is by leveraging your payroll services provider. Companies like InfoSync can receive data from various store systems and send payment information onward to your paycard vendor, which can greatly reduce set up time and provides added value. The other option for restaurant companies is to integrate the pay solution manually and pass the data along to their tip out provider. The quickest way to start electronic payments is to partner with a paycard vendor that supports an online portal for payment management.  Instead of handing cash to an employee, simply log in, choose the employee, and type the amount into the portal.  The funds are available within seconds of submitting the request, and there is an electronic log of all payments.

Netspend can help restaurants offer employees the flexibility to manage when and how they receive their tips, reducing the risk of carrying cash in-store or in-pocket after each shift. Electronic payments also aid during bookkeeping and reconciliation and can help solve the issue of tipping employees when your store has no cash on hand. As more and more business transactions move to cashless payments, restaurant companies will be exploring alternate solutions for paying employees electronically.

1 USA Today, July 2020, “Fact Check: A Cashless Society Isn’t Imminent and Wouldn’t Mean Total End of Cash”

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