Tips and gratuities

Tips are money customers give for service. In Canada, provincial rules say who keeps them and CRA rules say whether payroll deductions apply.

Also called: gratuities, tip pooling, tip out, controlled tips, direct tips

What tips and gratuities means

A tip (or gratuity) is money a customer gives in thanks for service, on top of the price: cash on the table, an amount added on the card machine, or a service charge on the bill.

Two sets of rules apply. Your province's employment standards law decides who the tips belong to and whether you can keep, deduct or share them. The Canada Revenue Agency (CRA) decides whether you take income tax, CPP and EI off them and report them on the T4.

If you run a restaurant, bar, café, salon or delivery business, mistakes here can mean paying employees back, or owing the CRA deductions you never took.

How it works

For payroll, the CRA splits tips into two kinds. Controlled tips are tips you control: for example, card tips that land in your bank account and you pay out, a tip pool you run, or a mandatory service charge. The CRA treats these as pay from you. You withhold income tax, CPP contributions and EI premiums, and include them in boxes 14, 24 and 26 of the employee's T4.

Direct tips go straight from the customer to the employee, and you have no say in the amount or how it is split. You withhold nothing and report nothing. The employee reports them on their own tax return and can choose to pay CPP on them with Form CPT20.

Quebec has its own system. In regulated hospitality businesses, employees must declare their direct tips to the employer. Declared tips are subject to income tax and EI withholding, but not CPP (Quebec employees are in the QPP instead).

In Quebec, the CNESST says you must pay at least the minimum wage without counting tips, and a lower minimum wage applies only to tipped employees in businesses such as restaurants and bars. Elsewhere, check your province before you treat tips as part of pay. A common mistake is using tips to cover business costs, such as a customer who walks out or broken glasses. British Columbia forbids this outright.

Tips and gratuities by province

Whether tips belong to the employee, and whether owners can share in a tip pool, depends on provincial law. These are the rules we confirmed on official pages.

Where the work is done	The rule
British Columbia	You cannot withhold, deduct from or require employees to return gratuities, except for a pool you redistribute among employees or a court order such as a garnishment. Owners can share only if they regularly do substantially the same work. Tips cannot pay for walkouts or breakage.
Ontario	You cannot withhold, deduct from or make employees hand over their tips, except to run a tip pool among employees. Owners, directors and shareholders cannot share in the pool unless they are a sole proprietor or partner who regularly does a substantial amount of the same work. If you have a policy on owners sharing in tips, you must post it in the workplace (since 21 June 2024).
Quebec	Tips belong to the employee who gave the service. You must pass on tips you collect in full and cannot keep any, even as discipline. Employees can set up a tip-sharing arrangement if a majority agree; the employer cannot impose one. The tipped minimum wage is $13.30 an hour (since 1 May 2026).
Nova Scotia	Labour Standards Code changes passed in 2026 (Bill 256) make tips belong to employees from 1 April 2027.

We did not confirm tip rules for the other provinces and territories. Check with your provincial employment standards office before you set up a tip pool.

Example: A café sets up a tip pool in Ontario

Priya owns a 7-person café in Kingston, Ontario. Card tips go into the business bank account, and she pays them out on each payday through payroll. Because she controls these tips, they are controlled tips: her payroll deducts income tax, CPP and EI on them and includes them on each T4.

Priya works the counter most days, doing the same work as her staff, so as a sole proprietor she can take a share of the pool. She writes a short tip-sharing policy and posts it by the staff room door. Cash left in the jar on the counter is split by the staff themselves, so she treats it as direct tips and does not run it through payroll.

Employment standards by province

Staffkin's free employment standards by province page lists the current minimum wage for every province and territory, including Quebec's tipped rate.

See the rules by province

Free tools and guides for this

Questions about tips and gratuities

Can an employer keep tips in Canada?

In Ontario, British Columbia and Quebec, no: the employer cannot keep employees' tips, and owners can share in a pool only in limited cases (Ontario and British Columbia) or not at all (Quebec). Nova Scotia's rule that tips belong to employees starts on 1 April 2027. Check your own province's rules.

Do I take CPP and EI off tips?

Only off controlled tips, the ones you collect or distribute. Direct tips that customers hand to employees have no employer deductions, except that in Quebec declared tips are subject to income tax and EI withholding.

Can tips count toward minimum wage?

Not in Quebec, where you must pay at least the minimum wage before tips; certain tipped employees there have a lower rate of $13.30 an hour. Check your own province's rules.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 4 November 2026.