New legislation is being passed through parliament that will force employers to distribute all tips and service charges in a huge and welcome change for hospitality staff. The bill has won backing from MPs as the recent private member's Bill on tips was submitted by Conservative MP Dean Russell.
The legislation is relatively complex, but we have summarised our thoughts below. You can view the Employment (Allocation of Tips) Bill directly here.
- All tips and service charges paid by customers must be paid out to workers
- Workers will include agency workers
- Tips and service charges received in a venue must be paid out to workers in the same venue
- An employee will have the right to see the employer's records detailing how tips and service charges are distributed
There is certainly a lot more to the bill, but as it is still going through Parliament, it is subject to change. We are still waiting on news regarding when the Employment (Allocation of Tips) Bill will be passed, as until it is things remain the same.
We have been working closely with Peter Davies, expert at all things Tronc and Managing Director of WMT Troncmaster Services Ltd.
Allocating tips and service charges to staff
All (100%) of the value of tips and service charges paid by customers with the exception of any tax or NI deductions must be paid out to staff. There is an additional comment to this, namely that the tips and service charge must be paid to workers by the end of the month following the month in which they were paid. So, for a tip or service charge paid on 15th August, this must be paid to staff no later than 30th September.
Multi site - cross site tips and service charges
Tips and service charge paid by customers in one site may not be used to pay staff in another site. The tip and service charge must be paid to those employees who have worked in the site that received the tip or service charge. However, it may be possible to distribute some funds to a central, non customer facing site (i.e. a dark kitchen or a head office) but this needs more detail.
Fair and transparent allocations
The new proposed legislation requires tips and service charge to be distributed 'fairly and transparently' to employees. A tronc system does NOT have to be in place for this to be fair, but if an employer contractually agrees to pay out specific amounts of tips or service charge to employees then National Insurance Contributions will be due. Where an independent and fair tronc is used, this satisfies the criteria for NI exemption. Employees additionally will have the right to ask and see that the employer has distributed 100% of the service charge and tip received. The employer cannot take or deduct any sums from the paid by customers aside from relevant taxes and NI contributions where applicable.
The Employment (Allocation of Tips) Bill also goes as far as declaring that agency workers must receive a fair share of tips. Effectively, Agency workers should not be penalised by being classed as agency staff, and should therefore be treated the same with tronc and tips as other employees.
We are watching this Employment (Allocation of Tips) Bill very closely and will update you on further news as it becomes available. As with anything that is being passed through parliament, the above may be subject to change!