The government has announced that it intends to introduce legislation requiring all employers to pass the full extent of tips received to their workers without any deductions in a fair and transparent manner. They already have to pass cash tips to them but not ones made via card payment as the government is aware that we are increasingly becoming a cashless society. Employers will be able to consider how best to pass the tips on to their workers, in line with a statutory Code of Practice, which will set out how tips should be distributed to ensure fairness and transparency.
Workers will be afforded a right to request information relating to an employer’s tipping record, which they will be able to rely upon in the event of them bringing an Employment Tribunal claim. These new rights will significantly benefit the two million workers in the hopsitality, leisure and services sector where tipping is common and can make up a large part of their income. These changes will be included in the Employment (Allocation of Tips) Bill, which was part of a public consultation in 2016. The Bill has not worked its way through Parliament yet but is expected to be brought forward soon, with the rules coming into effect at least one year after the law has been passed.
Advice for businesses… use a system called a “tronc”, a system designed to pay staff their share of tips and service charges in the hospitality sector. The benefit of a tronc is that tips are excluded from national insurance contributions which they are not if you manage the sharing out of tips yourself. A “troncmaster” should be placed in charge of deciding how the money is divided. They will need to run the payroll and be responsible for reporting to HMRC.