Tips and gratuities have made headlines again this week with Labour announcing that they would make it illegal for “rogue employers” to take a cut from money that was intended for staff.
Labour leader Jeremy Corbyn stated that “tips should be kept by the staff that earn them, not employers. It’s not fair or right that in businesses across the country, hardworking hospitality workers have had their tips pocketed by their bosses under the guise of bogus admin fees, or cover breakages, till shortages or customer walkouts”.
With this in mind, transparency is clearly becoming the focus in standard business practice (gender wage gap for example) and it is important that employers are aware of their responsibilities when it comes to Tips, Gratuities, Service Charges and Troncs.
A good start is the government’s ‘Code of Best Practice’, guidance that is not mandatory for businesses to follow but is sure to put them in good stead for any potential wage disputes.
The guide attempts to set out the four principles of the Code of Best Practice and highlight ways in which businesses can make information available to consumers and workers.
Traditionally tips are paid in one of three ways:
- Cash given at the end of a shift or from a customer
- Part of the pay packet that you receive
- An amount that’s pooled and shared between all staff – this is called a ‘Tronc’ and the person who then looks after it is called a ‘Tronc master’
Transparency for Workers
Your employees should be fully informed on the distribution and break down of service charges, tips, gratuities and cover charges and the level and purpose of any deductions.
Additionally, your employees should be able to confidently explain the business’s policy on tips, or know where to direct customers for more information, without any risk of detriment.
Employers should give the information to their staff in the form of a written statement, this statement should include:
- Exactly how tips are distributed (whether this is done through a tronc system, who the tronc master is)
- If cash and card tips are treated differently
- How much might be deducted for administration and what this covers
- Any other potential deductions
- What happens during holidays, sick leave, parental leave and other forms of leave
Lastly it is vital that employers comply with national minimum wage legislation, therefore, regardless of how they are paid, tips and gratuities cannot be used to make up national minimum wage pay.
Transparency for Consumers
The potential fallout of being accused of mishandling staff earnings could be catastrophic to a small business. Therefore, it is not just your staff who should be well aware of your tips and gratuities policy but also your customers.
Employers should clearly display on their premises prior to the point of purchase or choice their policy relating to mandatory and discretionary charges.
Businesses should also have a process in place to deal with requests from customers about how and to whom all service charges, tips, gratuities and cover charges are distributed, and the level and purpose of deductions.
Whether or not you agree that the Labour leader is right in demanding that businesses should not receive a percentage of the tips, it’s hard to argue that a clear, concise and transparent policy on service charges, tips, gratuities and cover charges is important your commitment to best practice and protecting you as an employer from a potential claim.