Gratuity calculator

For businesses, accepting cashless tips is more expensive than good old-fashioned cash. The most significant expenses are Employment Insurance (EI) and Canada Pension Plan (CPP) contributions that you make on tips that you distribute. As use of cash declines and your employees lose income, when does the additional expense become worthwhile?

After dozens of conversations with business owners it has become apparent that it’s difficult for people to get a feel for the costs/benefits of accepting cashless tips. To be fair, it is very tedious to work out!

Go straight to the gratuity calculator.

To help you make informed business decisions we put together a simple gratuity calculator that allows you to assess the costs/benefits in your particular circumstances.

Instructions

Simply enter values for the hourly wage, hours worked per day, days worked per year, and average gratuities per day for a typical employee. Then we'll calculate EI and CPP contributions that you make on wages and on tips that you distribute.

If you have a range of different employees (e.g., waiting staff, front of house staff, ...) then just repeat the calculation for each group of employees.

Remember, the results are for an individual employee. If you have 10 employees, the costs will be 10 times higher but the proportions will remain the same.

How does it work?

We calculate the following:

1. Employer EI contributions on wages:
   • These are calculated based on Federal EI premium rates and maximums for 2025. Businesses in Quebec have slightly lower rates — so they will have lower costs than we calculate — but this does not materially affect the results.
2. Employer CPP contributions on wages:
   • These are calculated based on CPP contribution rates, maximums and exemptions, and second additional CPP contribution (CPP2) rates and maximums for 2025.
3. Employer EI contributions on gratuities:
   • We account for the contributions already paid on wages, then determine the additional contribution that arises from gratuities that you distribute.
4. Employer CPP contributions on gratuities:
   • We account for the contributions already paid on wages, then determine the additional contribution that arises from gratuities that you distribute.
5. Card fees:
   • We assume that you are accepting cashless tips in the conventional way (at point of sale) and are paying card fees of 2.5 %. This is representative of the fees on card-present payments.

Understanding the results

Numbers and graphs aren't for everyone, so here's a guide to understanding the results.

We break the results down in three ways:

1. Costs to employer

This shows you what is driving your costs:

• Wages.
• Wage costs (i.e., EI and CPP contributions on wages).
• Gratuity costs (i.e., EI and CPP contributions on gratuities, and card fees on gratuities).

Gratuity costs typically make up only a small percentage of your overall costs of employing someone.

2. Employee earnings

This shows you what proportion of an employee's earnings comes from:

• Wages.
• Gratuities.

The proportion of earnings (for the employee) that comes from gratuities is significantly larger than the proportion of costs (to the employer) from gratuities. In other words, accepting cashless tips is a cost effective way for an employer to increase employee earnings (which has indirect benefits such as increasing employee retention).

3. Gratuity costs

This shows you what proportion of your gratuity costs come from:

• EI contributions on employee earnings from gratuities.
• CPP contributions on employee earnings from gratuities.
• Card fees on gratuities.

With tippl you don't pay the card fees on gratuities.

Limitations

We use the 2025 Federal EI and CPP rates. Businesses in Quebec have slightly lower EI rates — we do not account for those. That said, this simplification won't materially affect any conclusions.

Our gratuity calculator is aimed at business owners and employers, so for simplicity we do not calculate employee withholdings.

Businesses may have other wage and gratuity costs that we have not accounted for.

Our gratuity calculator is an educational tool designed to help employers make informed business decisions. It is not to be used for accounting or tax purposes.

Tippl. Cashless tipping, made simple.

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