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Do you want a tip?

Heather Aust

2

Minute Read

1 May 2024

The government has pushed back the implementation of the Employment (Allocation of Tips) Act 2023 to 1 October 2024, instead of 1 July 2024 as originally planned. The Act requires employers to pass 100% of tips on to workers.

 

Employers must follow a new statutory Code of Practice when distributing tips. You can check out the final draft version of this code here.

 

Workers will be able to view an employer’s tipping policy, their tipping records and will be able to use the Code as evidence in an Employment Tribunal if they feel they're not receiving the tips they should be.

 

So how are impacted employers responding to this change? Well Ping Pong, a London restaurant chain, has faced criticism for scrapping tips all together by way of card payment and are instead trialling an optional 15% ‘brand charge’ ahead of the new tipping regulations. The charge is intended to cover “franchise fees and other brand related expenditure” replacing a 12.5% optional service charge (90% of which went to staff). The chain’s parent company said it had increased staff wages by 19%, which is £1 above the new legal minimum, to attempt to compensate staff and ensure that their earnings match what they would have received through the service charge distribution. The restaurant has also said that customers can still leave cash tips.

 

The Unite union is gearing up for a national campaign ahead of the implementation of the Act, advocating for fair tips. Their aim is to ensure that restaurants don’t implement “outrageous policies” in the place of a service charge.

 

While the government aims to put an estimated £200 million more into workers’ pockets with these new regulations, restaurants such as Ping Pong fear it will add to costs especially during a period of high inflation and sluggish customer spending.

 

Many hospitality organisations are aware of tronc systems and make use of them. A tronc system offers a separate, organised pay arrangement that can help address compliance challenges with the new regulations. Troncmasters handle the distribution of tips, gratuities, and service charges through payroll, usually without incurring either Employers’ or Employees’ National Insurance. By implementing a tronc system, you can ensure compliance with the regulations while ensuring that your employees are receiving their rightful tips.

 

Businesses where tipping is common should have an appropriate policy in place. If relevant to your organisation, and you require any guidance or assistance on this matter the CG Employment Team are on hand to assist.

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