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New Law on Staff Tips: What Employers Need to Know Ahead of October 2024
19 Sep 2024
Starting October 1st, 2024, a significant change in employment law will impact how businesses handle staff tips. For employers, especially those in the hospitality industry, this new regulation is set to bring about essential changes in managing staff tips, and service charges.
At WR Partners, we understand the importance of keeping our clients informed and prepared for upcoming legal changes. In this blog post, we’ll cover what you need to know about the new tipping law and how it may affect your business.
What’s Changing?
The new law aims to ensure that employees receive 100% of the tips, gratuities, and service charges that customers pay. This new legislation stops employers from withholding any part of these payments for business use. Whether the tips are given in cash or by card, employees are entitled to receive the full amount.
For many businesses, especially in hospitality, it has been a common practice for tips to be pooled and then distributed through a system known as “tronc.” This new law doesn’t eliminate the practice of pooling tips but aims to ensure that these funds are fairly distributed to employees without deductions by the employer.
Why is This Law Being Introduced?
The government’s objective is to protect workers’ rights and improve fairness, particularly in industries where tipping plays a crucial role in staff earnings. According to recent surveys, many workers have raised concerns that they weren’t receiving the full amount of tips left for them. This law intends to address these issues by increasing transparency and ensuring workers receive what they are owed.
For businesses that fail to comply, there could be significant repercussions. The legislation gives workers the right to take claims to an employment tribunal if they believe they haven’t been given their fair share of tips. It’s vital for businesses to be aware of this and to make the necessary adjustments to their policies.
What Are Your Responsibilities as an Employer?
With the introduction of this law, employers need to prepare for several key responsibilities:
- Full distribution of tips: From October 1st, you must ensure that 100% of all tips, gratuities, and service charges go to your employees without deduction.
- Troncmaster arrangements: If you use a tronc system for pooling tips, ensure that your troncmaster (often a senior employee overseeing the distribution of tips) complies with the new rules.
- Record keeping: Employers must keep clear and detailed records of how tips are distributed among staff for at least three years. This helps ensure compliance and provides proof in case of any disputes.
- Transparency with staff: You’ll need to be upfront with employees about how tips are distributed and provide them access to relevant records if requested.
How Can You Prepare?
To ensure compliance and avoid potential disputes, businesses should review their current practices around tipping. If your business has been deducting a portion of tips or service charges to cover costs, it’s important to end this practice before the October deadline. Instead, focus on creating a transparent and fair process that aligns with the new law.
It’s also a good idea to communicate these changes to your staff well in advance. Clear communication will help your employees understand how tips will be handled moving forward and give them confidence in the system’s fairness.
How Can WR Partners Support You?
WR Partners makes payroll effortless for businesses of all sizes. Our expert team focuses on the details that will help keep your payroll running smoothly and efficiently while providing you with full visibility, insights, and guidance on best practices. If you need support with your business’s payroll, contact our team to find out more.
Please see our flowchart below to help build a better understanding of the new tipping processes.
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