Tipping is about to become a challenge that hospitality businesses need to prepare for.
In 2023, the government announced that they would be changing the rules on tipping. As of the 1st July 2024, the Employment (Allocation of Tips) Act will require all employers to manage their staff tips in line with fair and consistent criteria.
It applies for all businesses in England, Scotland and Wales collecting, allocating and paying tips, gratuities and service charges (referred to collectively as ‘tips’).
It is imperative all hospitality businesses take steps to make sure your business stays legally safe. From now on all businesses have to make sure that all their staff (including agency workers) receive their tips in full.
Under the new law, it will be illegal to withhold tips from staff. 100% of tips and service charge must be allocated to staff members. Tips must be paid in full to employees no later than the end of the next calendar month after they are received.
With the new tipping legislation, the demand for a compliant and cost-effective solution has been increasing rapidly.
Under the new rules, tribunals will be able to award workers up to £5,000 to compensate them for any financial losses suffered because of their employers’ failure to pay them correctly (or at all).
The government’s code of practice says that you should follow these four principles in your tipping practices:
• You should have a written tips policy. It should be easy for anyone to access your policy and it should also be on public display in your work premises.
• You should have a process for dealing with customer requests about how you manage tips and service charges.
• You should make sure your staff understand and can explain your business’ policy on tipping and where to direct customers for more information.
• Your workers should receive a full breakdown of how you distribute service charges, tips, gratuities, and cover charges. Plus, any deductions you make and why.
Once this law comes into effect, you will need to make sure you:
• Have a written tipping policy setting out how you allocate staff tips fairly.
• Keep records of any tips given to staff i.e. the name of the worker who received the tip and how much money they received.
• Have a fair process for resolving issues and concerns from staff who feel they haven’t received the right share of their tip.
• Have a process for managing customer queries around your tipping records.
Tax implications need not change, as long as the arrangement of allocations and payments is compliant with the new rules (ie. paid in full, on time and allocated fairly).
Urocked with Paynt Card Terminal provides a solution you’re going to need for July 1st.
It’s a digital tipping solution and integrated payment platform to simplify gratuity management. It seamlessly enables innovative pay at the table and mobile, card, and QR code tipping, directing 100% of tips to employees’ digital wallets without employer payroll involvement
For businesses, this provides transparency, regulatory compliance with evolving regulations, and reduced administrative costs, while employees benefit from receiving their tips directly in full.
Interested in a demo. Contact me and let’s arrange for you to see this. I would be happy to provide an analysis of your current merchant setup and costs from your supplier statement and give you a comparison to what Paynt would charge. Call me on 07454 978255 or email at larry@smeehee.co.uk
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