This article reviews the Merchant Discount setting within Tip Automation rules. 


Note: The Merchant Discount setting is in beta. Please contact your CSM to learn more.


Article Topics:


Overview


When the Merchant Discount setting is configured, a percentage of POS card tips is withheld from tips owed to contributing and receiving employees to cover credit card processing fees. The Merchant Discount setting is set separately on each tip automation rule for a location.

The total amount withheld is viewable in the Contributors portion of tip automation distributions in the Withheld CC % column. The Withheld CC % column is only displayed on distributions where the Merchant Discount setting is configured. 



Calculations


The total withheld amount is split between the contributing employee and receiving employees based on the percentage of total tips out contributed by the contributing employee. Each employee's portion of the merchant discount amount is then subtracted from their tips owed. 


The contributing employee's portion is calculated by first determining what percentage of the merchant discount they are responsible for. The contributing employee's portion percentage is calculated as (Total Tips - Tip Out) / Total Tips. This is then applied to the total merchant discount to get the amount withheld from the contributor. 


The receiving employees' portion is calculated as the total merchant discount - contributing employee's portion. 



Example:

Merchant Discount Withheld Percentage = 2%
POS Card Tips = $750
Total Merchant Discount = $15

Contributing EmployeeReceiving Employees
Total Tips = $750
Tip Contribution = 20%
Tip Out = $150

Contributing Employee Portion %
(Total Tips - Tip Out) / Total Tips
(750-150)/750 = 80%

Contributing Employee Portion
Total Merchant Discount * Contributing Employee Portion %
15*.80 = $12

Contributing Employee Tips Owed
Total Tips - Tip Out - Merchant Discount Withheld
750 - 150 - 12 = $588
Tips Out = $150

Receiving Employees Portion
Total Merchant Discount - Contributing Employee Portion
15-12 = $3

Receiving Employees Tips Owed
Tips Out - Receiving Employees Portion
150-3 = $147



Credit Card Tip Withholding in the POS


Some POS systems already calculate and withhold the credit card processing fee percentage from tips before data is polled into R365.

The calculations for the merchant discount within Tip Automation assume that the credit card processing fee percentage has not already been withheld. It is recommended to confirm settings in the POS for the location prior to enabling the merchant discount setting in Tip Automation. 


Journal Entries


If the 'Pay Tips With Payroll' setting is enabled for the location, 'POS Cash' and 'POS Card' tips in POS data are included on DSS Sales JEs and associated with the configured Tips Payable Account. 



Since the merchant discount setting reduces the amount of tips paid to employees, it is recommended to create a journal entry to reallocate the total merchant discount amount from the tips payable account to an appropriate liability account. 


Setup


Follow these steps to configure the merchant discount setting within a tip automation rule: 


Open the desired Tip Automation rule.
Enable the Apply Merchant Discount of toggle.
Enter the percentage of POS card tips that are withheld to cover credit card processing fees.  
Click Save.