Beta Member

Updates to Square Payroll tip distribution?

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.


 Screen Shot 2021-10-20 at 7.56.04 AM.pngScreen Shot 2021-10-20 at 7.55.18 AM.png


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


Message 1 of 90
2 Verified Answers
Verified Answer

Re: Updates to Square Payroll tip distribution?

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. 

Verified Answer

Re: Updates to Square Payroll tip distribution?

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.


This was a great idea for a restaurant (tip pooling by shift), but for my brewery I WANT tip pooling across the pay period to encourage working during non-peak shifts. 


Now Square is doing away with that as an option.  Why?!?!  This is the way I now pay my employees and Square is taking it away so I'm going to have to do it manually...  seriously.  Square is really starting to frustrate me. 

Message 22 of 90
Square Community Moderator

Hi @dp757 - Thanks for reaching out!


I've merged your post with an existing thread where other sellers are discussing the new Tip Pooling feature as well.

I hope this information is helpful but please do let us know if you have any additional questions. Always happy to help! 😊

Community Moderator, Square
Sign in and click Mark as Best Answer if my reply answers your question.
Message 23 of 90

Hello.  I have messages Square and they instructed me to post here.  Does anybody have an issue with Square removing the "tip pooling" by pay period or day functionality from Square Payroll?  


For background, we use top pooling for our coffee shops.  It helps us spread the team atmosphere, recognizes work closers and openers do when the shop is slower, and helps incentivize slower shifts, which typically would be harder to fill.


here are problems it will cause my team:


1) our pay is wage + tips = real wage.  I will have to increase pay for half the staff, but decrease pay for the other half. This will be a huge issue.


2) because we use tip pooling, busy shifts and slower shifts are equally sought after.  Prior to this, nobody would work slower shifts and people wouldn't want to close.


these are the two largest issues.


Square could add functionality without removing tip pooling, so it seems unnecessary.


I really hope square reconsiders this move as it has larger ripple effects through the labor market that will negatively impact many square payroll users.



Message 24 of 90

I didn't see your thread when I posted:




We have some of the same issues currently and foresee many of the problems you too are forecasting.

Message 25 of 90


I don't see why they didn't just add more tip options while keeping the existing ones. It's been working fine for years and not broken so it makes no sense for them to take a feature away. 

Message 26 of 90

I dislike this change as a well. We are already short staffed and if no one wants to work daytime because it's less busy, I'll be working lunch alone regularly again. Already overworked owners will be forced to close daytime hours and we can't afford that either. No reason to take the option away. I am calling customer service to voice my complaint as well as replying to the "was this helpful" survey. If they can't offer an option that works for us we will shop for a provider who can support us better 

Message 27 of 90
Beta Member

Same concerns here. Why fix what's not broken? 


Add it as an option but leave working features alone please. 

Message 28 of 90

I assume that everyone using Payroll received the email today announcing the changes in the way tips are distributed as of December 1st. I understand listening to the voice of the customer and rolling out new features that Square believes will improve the customer experience, add flexibility, efficiency etc. What I don't get is why they are completely abandoning the existing method of tip pooling.


Let me explain. Currently, we tip pool all the digital tips. They are evenly distributed by all employees based on the number of hours they worked during a pay period. My entire organization, though small with under 20 employees, has a compensation model built around this process.


Moving forward, Square wants us to either:


1. Distribute tips evenly to all eligible employees who were clocked in during the transaction or

2. Tip directly to the employee that made the sale.


In my organization, everyone works to fulfill customer satisfaction. They are doing things out of sight of the customer and often times, not even during operating hours. This completely blocks those types of staff positions from receiving tips.


For my business, here are some of the problems I foresee with either selection:


1. In this mode, employees will only want to work at peak hours. The fringe hours, that are equally important to us not for the sales directly, but tasks such as fulfillment, prep work, janitorial tasks etc, will be nearly impossible to fill.

2. We will have "cashiers" fighting over who is on the register in this mode. They will camp on the registers and not fulfill the big picture goals of the organization.


In either mode, I am going to have to renegotiate contracts and other agreements with staff because this isn't what we have bindingly agreed to. If Square provides some "work around" whereby I have to do more work manually during payroll, that isn't an improvement, that is a wholesale downgrade to a very important feature that we've been using for over 3 years.


Completely removing the existing method is nearsighted at the least. In an industry that is having a horrible time with staffing, both in retention and recruitment, Square has blindly put us in serious legal jeopardy with our staff.

Message 29 of 90

I agree with your points and I hope Square reconsiders this change.

Message 30 of 90
Beta Member

I came on here to basically bring up the same points. I split tips based on hours worked across the pay period as all our employees are cross trained to do every job and this seems the most fair way to do it. I can easily make a spreadsheet to help me do the distribution myself but it's now an extra job I'll have to do vs letting the payroll app just do it - so I'll start looking at other payroll and timesheet options to do this instead. I hope Square will reconsider but my experience from watching these forums for years is that Square doesn't actually listen to customer requests and just kind of does their own things. 

Message 31 of 90
Beta Member

AMEN! PREACH! They blindly made a decision without talking to the customers. We too will need to go back to all of our employees.


You mention December 1st...I think it's already implemented as of this next pay cycle.

Message 32 of 90

I'm getting this from yesterday's email:


"With this change, you will no longer be able to pool and split tips by workday or pay period after December 1st, 2021. Please review and select your preferred tip distribution method at your earliest convenience. If no action is taken by 12/1, tip importing will automatically be disabled until a method is selected."


I just ran payroll for 10/1 - 10/15 and it appears to be still functioning as it did previously.

Message 33 of 90
Beta Member

Interesting...thanks for clarifying....but still sucks!

Message 34 of 90
Beta Member



Also - if the tip and who gets a part of it is based on when the tab/ticket/table is OPENED vs. when the transaction is completed, there is not one report or way to SEE when a tab/ticket/table was opened, so we'd be relying on the system to do the work without being able to verify. 


Message 35 of 90

We've been using Square Payroll and really liked the option of splitting tips per workday. Certain employees might start tabs but not end them, perform opening, closing, or prep duties that help others make sales, and it seems to be a typical method for many restaurants and bars to use. 


Lately we got an email stating this option would be going completely away with two other options being the only available. While I'm sure others like the new options, we'd really like the ability to stay with our current setup and continue our current tip pool. It looks like both options will be available for a few months, so I dont see why it couldn't continue indefinitely. 

Message 36 of 90

Please leave tip pooling by pay period as an option! We have support group employees that do not always work during retail business hours.

Message 37 of 90




We own and operate a bar where we have opening, closing, and mid shifts.  The only reason an employee will agree to work the opening shift is because we currently use pool by workday.  This allows all tips to be evenly divided amongst the employees that worked that day (based on the number of hours they work).  If this change is made, no employee will want to work the opening shift because its significantly less tips than the closing shift.


Pool by transaction and pay tips directly will penalize any employee that works the opening shift at my business. Pay tips directly also causes employees to become competitive and requires them to sign in each time they switch at the register.


This new direction is unacceptable and if it goes into place on December 1st, I will be forced to find an alternate payroll system.


Message 38 of 90

Can I convey how much I do not like the December 2021 change that will take effect with Square Payroll Tip Importing.  https://squareup.com/help/us/en/article/7662-updates-to-square-payroll-tip-importing


Not that this change may not may sense to some restaurants and cafes, but that we are not given the option to retain the old method of pooling and splitting tips by pay period or workday.  Moreover, before executing this plan a tech support document should have been published with a manual workaround for those who need to keep using the old method of tip distribution.


Please know, and I cannot stress enough, how disruptive this proposed change will be to my coffee shop business.  Unlike restaurants, my core sales are in the morning and my evening staff does all the supporting work and prep for the next morning's sales.  So the per-pay period tip share works well for us and I wish to remain under that system.


Additional consideration is that, as a super-small business owner who is short staffed and having to compete with big box retailers who pay double what I pay, this change limits my ability to compete for staff.  My staff are tipped employees, where the customer makes up half of their wages.  I can get my staff to work at less desirable shifts because of the proportional tip sharing, without it I would be hard-pressed to pay them more to make up for the loss of proportional tip sharing...or simply blow up my labor cost.



Happy Coffee Shop owner who is not happy about the Square Payroll Tip Sharing change.

Message 39 of 90
Beta Member

@kellyj Can you convince ANY of us that you guys are listening to us? Or is it just you guys responding incorrectly and then ignoring the comments we make?


It's as if you have some internal team that says you want us to help BETA test, but then you don't listen. AND, you don't communicate. 


Please tell the Product Manager of your Payroll product to spend time looking at the competition because making stupid changes like disallowing pooling by pay period. I mean seriously, who thought taking this away was a smart play?


For the rest of you, given I guess I will have to do this manually any way, I'd rather move my business to a competitor then have to continue dealing with changes Square makes without talking to the people that use their product,

Message 40 of 90
Super Seller

@dkhtodd Let me jump in here and say that I 100% believe square does actually listen to us.  I have been a beta tester for a while now and a super seller and see and try to give back on the forums.  I promise that Square is seeing this and will look at it.  I am of course a square customer just like all of you, and I have found square to be a lot more responsive than most businesses, but they guys and gals on that work for square are people and this is how we fix things by communicating.


I would ask anyone that is frustrated or doesn't agree with this or any change to make a post and clearly state why you use square payroll and how this change positively or negatively affects your business.  I truly believe square tries to make the best decisions it can, but sometimes they need our input.  I also don't know a single company that is 100% perfect all the time.


So before we burn 🔥 the farm to the ground, lets work and see what can be accomplished.



Message 41 of 90

Thank you and promise you are heard. I am curious if you are still seeing the setting to distribute tips and still have that as an option or if your post is just in reaction to the email. You should have this as an option now, and we're working on solutions based on this feedback. 

Promise we do hear you and are working on it.

What Donnie said is absolutely true, your voice is important, and how this impacts your business even more so. 

Like I said, please let me know if you do still see this option now, as it should be available and I will follow up with other progress from the team ASAP.

Beta Community Manager, Square
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Message 42 of 90