Changing Tip Allocation Laws

Hospitality is a dynamic industry, and yet more change is on the horizon for the owners and management of hospitality businesses. 

New plans for laws surrounding the distribution of tips and service charge are being finalised. Simply put, these changes will mean that 100% of tips given by customers must go to staff. These can no longer be kept by business owners or management.

This article will give you information on the changes you can expect and set out some informal advice for hospitality business owners to meet the expectations set by the incoming legislation.

How do restaurant customers feel about this change?

Perhaps the new legislation opens up a chance for hospitality businesses to reinforce trust with both their employees and their guests, as it appears that consumers will be more comfortable knowing that their tips and service charge will be going to the people they wish to receive it.

This is even more valid with the preference for cashless payment methods increasing! A recent survey by YouGov outlines that 64% of people feel less confident that staff will receive a cashless tip – meaning that they often choose to request the removal of service charge completely, or actively choose to tip in cash instead.

What does this all mean for employers?

Many businesses will need to make changes to their distribution of tips and service charge going forward – with 100% of tips now needing to go to staff. But in addition to this, a clear written policy and good clear records of tip and service charge allocation are now necessary.

 What is the best way to distribute tips?

There are a few different methods you could use for the distribution of tips, a conversation with your restaurant management and your staff may be necessary to decide on which one is the best fit for your business.

Tip Pooling

Simply put, all tip money can be “pooled” in a “pot” and divided out to staff members. The decision on how to allocate tips from this central pot is made by the troncmaster. There are a few different methods for distributing tips from this pot, two of these will be outlined below.

Evens

You could divide the pot by all staff evenly regardless of position, department or job role.

By Department

You could divide the pot by section / department and allocate different proportions of the pot to each group. For example, one group could be your bar staff and one group could be your kitchen staff. 

Employers will need a clear tip allocation policy.

Once you have decided on the appropriate method of sharing tips, you will need to create a clear written policy regarding tip distribution.

Under the new legislation, it will be vital that staff are able to access this.

Employers will need to keep tip allocation records.

As well as a clear written policy on tip distribution, you will need to keep records of tip payments. This is because employees will now have the right to request your tip distribution records and can bring this to an employment tribunal if they believe that the Code of Practice has been broken.

How can Opsyte help?

Opsyte has a Tronc module which allows you to set up a framework for Tip and Service charge allocation. Your tronc payments each month will be automatically calculated based on your approved hours, and your tip and service charge values are automatically collected through till integrations.

Take the extra admin out of the changing legislation by investing in great software for your business. 

Also, try checking out our partners at Troncbox!