The UK’s hospitality scene just got a whole lot fairer! As of October 1st, 2024, new tipping legislation under the Employment (Allocation of Tips) Act is in effect, designed to boost the earnings of roughly 2 million hardworking hospitality staff across the country. This act ensures fair tipping practices and protects employee rights for tips. But what exactly does this mean for your business? Let’s break it down:
Key Changes in the New Tipping Legislation
Here’s a breakdown of what the new legislation as well as what the UK Government’s guidance means for hospitality businesses:
1. Every Penny Counts: Full Tip Distribution to Workers:
The new law strengthens workers' tipping rights and mandates that all tips and service charges go directly to employees. This also means that any credit card processing or admin fees associated with the tip are the responsibility of the business, ensuring hourly workers receive every penny they earn under a fair tipping practices UK standard.
2. Location, Location, Location: Keeping Tips Local
No more pooling tips across multiple venues! Tips earned at a specific location must stay with the employees who earned them at that location. This tips distribution policy ensures that hard work is rewarded fairly, no matter where someone is stationed within your business.
3. A Slice for Everyone: Including Non-Customer Facing Staff
It's not just about those on the front lines. The traditional tronc system in hospitality has evolved to include kitchen staff, maintenance crews, and other behind-the-scenes heroes who contribute to the overall customer experience. These heroes are now entitled to a slice of the tipping pie.
Fairness in Tip Allocation: The Role of Tronc Systems
Tronc systems are widely used in the UK to manage and allocate tips among employees. The Tronc system in hospitality allows for a fair distribution of tips, which is critical under the new regulations. However, the troncmaster must now adhere to the principle of fairness to avoid any disputes.
Businesses should review their tip distribution policy to ensure they comply with the updated guidelines, consulting their troncmaster for clarity if needed.
Swift Rewards: Timely Tip Distribution
The legislation now requires that tips be distributed to employees within one month of receipt, promoting quick and transparent compensation. Delaying payments is no longer permissible, as the Employment (Allocation of Tips) Act prioritises regular and timely distribution.
Agency Worker Entitlement
In an effort to extend employee rights to tips, agency workers are now entitled to tips like regular employees. This change can pose new logistical challenges for businesses, but it emphasises the importance of equal treatment.
Protecting Wages: No More Tip-Based Contract Renegotiations
Under, the new law, tips can no longer be used to renegotiate contracts or as a substitute for base wages. This ensures that tips are truly seen as additional earnings, rather than a replacement for fair pay, supporting tipping rights for workers across the industry.
Impact on Management: A Shift in Compensation
Management and executive staff will no longer receive tips, so employers may need to reconsider their compensation structures. This ensures that tipping remains a benefit for frontline and support staff who directly contribute to customer satisfaction.
Staying Compliant: Operational and Financial Adjustments
Employers must comply with tipping laws to avoid legal headaches. This may involve updating payroll systems, implementing transparent tracking methods, and even adjusting budgets to absorb costs previously deducted from tips. Employers should regularly consult the latest guidelines to ensure their tipping policy meets legal standards.
Expert Insights: Unpacking the New Legislation
To help you navigate these changes, we hosted a webinar, Getting Ahead of the New UK Tipping Legislation, with industry experts Andy Hamman, Director of The Tronc Advisor, and James Brown, co-founder of TipJar and CEO of Prezzo. Here are some key takeaways:
Processing Fee Compliance: Systems deducting fees from tips are no longer compliant, as employees are entitled to 100% of their tips.
Best Practices for Tip Handling: Transparency and speed are crucial. Give employees access to data showing how tips are split. Having the systems in place to provide these breakdowns is crucial for tipping compliance.
Inclusion of Non-Guest Facing Roles: Fairness in tip allocation depends on overall compensation packages, and businesses can seek advice from their troncmaster in cases of dispute.
Technology to the Rescue: Streamlining Tipping Practices
TiPJAR, a platform introduced by James Brown, integrates with Deputy, allowing businesses to allocate tips based on hours worked. This tipping compliance tool supports fair and transparent tip distribution and eliminates outdated manual processes.
TiPJAR eliminates the headaches of outdated methods like spreadsheets and provides a much-needed upgrade to today's practices so businesses can implement a modern tipping policy. By promoting transparency, it fosters trust and ensures everyone gets their fair share.
Ready to embrace the future of tipping? Consider implementing technology solutions like TiPJAR and Deputy to modernise and streamline your tipping practices, making tipping more transparent and efficient for everyone.
