How to prepare for the Employment Allocation of Tips Act

Guest blog by TiPJAR

With the 1st of October fast approaching, the hospitality industry is bracing itself for a significant shift in tipping legislation that will reshape the way businesses manage and distribute tips and service charges. So, to help, we have produced a quick step-by-step guide on how to transition to the Fair Tips Act.

Step 1: GET YOUR POLICIES IN ORDER

You should start making changes by crafting a clear and comprehensive policy that spells out exactly how tips and service charges are shared in your business.

STEP 2: TALK ABOUT YOUR POLICIES

Like it or not clearly communicating your policy and empowering your teams with knowledge about their rights regarding the upcoming changes in tipping regulations is about to become an essential part of compliance.

STEP 3: CONSIDER IMPLEMENTING A TRONC

Now might be the perfect opportunity to explore the benefits of implementing a tronc system if you haven’t already done so.

Implementing a tronc system offers several advantages over not having one:

• Compliance:
  With the new legislation emphasising fair and transparent tip distribution, a tronc ensures that your business adheres to legal requirements, reducing the risk of penalties or disputes.
• Efficiency when choosing an automated solution:
  Automated Tronc systems simplify the process of tip allocation, saving time and resources compared to manual methods. This efficiency allows your staff and head office teams to focus on delivering exceptional service rather than managing tip distribution.
• Financial benefits:
  Tronc systems can lead to huge cost savings for both employers and employees. By exempting tips from National Insurance contributions, businesses can reduce payroll expenses, while employees may enjoy increased take-home pay. TiPJAR can even work with you to reclaim up to 6 years’ worth of NICs you and your staff have already paid on tips.

STEP 4: REVIEW YOUR EXISTING TRONC SETUP (IF YOU DO HAVE ONE)

Got a tronc arrangement already running? Time for a check-up!

• Double-check for compliance and fairness:
  If you spot anything you’re unsure about, or places where things could be better, don’t hesitate to fix them or seek professional advice.
• Spot where you can boost performance:
  Keep your eyes peeled for ways to make your tronc even better and more effective for your team.
• Get your team involved
  We’re huge believers that it’s critical to have your team involved in the review and policy-writing process. Their feedback is gold. Open the floor for ideas, suggestions, and any concerns they might have. After all, you’re all in this together!
• Stay committed to getting better:
  Tronc management is an ongoing journey, not a one-time thing. Keep an eye on how things are going, and don’t be afraid to make changes along the way.

STEP 5: FINANCIAL MODELLING

It’s time to dive into the numbers and assess how the legislation may affect your financial landscape. Before implementing any changes, carefully review the terms and conditions associated with your tronc.

• Have you been paying for National Insurance on tips? If you were not deciding distribution as an employer, you and your staff could be eligible to claim up to 6 years of contributions back!
• Look at how much distributing tips or running your tronc is currently costing you.
• If you previously kept a portion of tronc back as a reserve to distribute later whether to cover holidays or quieter periods, it’s simply no longer allowed. It’s time to be open with your team their income may fluctuate more going forwards and consider whether it’s viable to pay tronc to team members who are not working – on holiday or other leave – when there’s no “tronc reserve” to cover this.
• You may even want to look at the balance between salary and tronc, and make sure you’re not over-reliant on tronc to achieve a sustainable and competitive overall reward.
• With salary negotiations involving tips becoming a big no-no, it’s time to review staff compensation strategies.
• Consider the long-term financial impact. Look beyond immediate changes to anticipate how implementing a compliant tronc system can support your business’s financial health and sustainability over time.

STEP 6: UPDATE EMPLOYEE CONTRACTS

Previously, it wasn’t uncommon to agree with staff to take a different wage or salary in exchange for a different share of tronc or tips, usually a reduced salary for a higher share of tronc. However, under the new legislation, you can’t leverage commitments on tronc distribution as part of salary negotiation. Staff wages or salary (whether for new starters or existing team members) must agree without reference to tronc distributions.

Employers must clearly define the proper basic pay amount, excluding tips, in employee contracts to avoid liabilities.

STEP 7: EVALUATE TECHNOLOGY SOLUTIONS

When preparing for the new tipping legislation, it’s essential to assess your technology solutions to ensure they align with compliance requirements. Tip management software and modern point-of-sale (POS) systems offer efficient ways to streamline tip distribution and enhance accuracy. These solutions can automate tip calculations, track tip amounts for reporting, and ensure transparent distribution among staff members.

STEP 8: SEEK PROFESSIONAL ADVICE

Legal or financial experts with specialised knowledge of hospitality industry regulations can provide invaluable guidance and clarity. They can assess your specific situation, review your existing practices, and offer tailored recommendations to ensure compliance with the new legislation.

WE’RE HERE TO HELP!

As the countdown to October 1st begins, hospitality operators must take proactive steps to ensure compliance with the upcoming tipping legislation.

At TiPJAR, we prioritise working closely with you and your team to establish fair, transparent, and compliant policies tailored to your business’s unique needs. Recognising the diversity of operations, we reject a one-size-fits-all approach and instead collaborate with you to craft policies that resonate with your values and team dynamics, whether you run a bustling restaurant, a cozy cafe, or a lively bar.

Our Supertronc product offers automated tracking of transactions and tip distributions, ensuring staff transparency and timely payments. By implementing a compliant tronc policy through TiPJAR, businesses can enjoy significant savings on National Insurance contributions while streamlining tip administration and maximizing cost-effectiveness.

We’re here to support businesses every step of the way. If you’d like to find out more about our solutions – get in touch with us here.