Ensuring your tips and gratuities reach the worker

Posted on September 9, 2016

It's coming to the end of Summer and many of us are planning new gym and eating regimes to reduce wider midriffs after holiday indulgences.

Those who enjoy eating out might be interested to learn about a government consultation that was conducted earlier this summer on tips, gratuities, cover and service charges.

In essence, the Government was seeking feedback on its belief that all discretionary payments for service should be:

discretionary – it should be clear to consumers that they are voluntary;
received by workers; and
clear and transparent to consumers and workers in terms of how the payments are treated.

The Government received 183 responses to the consultation and is currently reviewing them. Issues to be dealt with include ensuring that workers receive a fair share of discretionary payments for service (or tips) as well as ensuring that both consumers and workers know how those tips are treated.

Similar reviews have taken place before and a voluntary Code of Practice was published in October 2009 to provide information and increase transparency in the hospitality, leisure and service industries.

Tips are an important component of many workers' wages especially in the hospitality sector. It is to be hoped that the Government's plans will bring a swift end to unfair tipping practices.

What about tax on tips?

It is also to be hoped that the Government work with HMRC to clarify what taxes are payable on tips. Currently, there are different systems in place depending on whether the customer leaves the tip on the table or pays it as part of the bill – and then on how the tips are dealt with. Sometimes employers will distribute the tips to the employers and sometimes employees are left to decide on how the tips will be divided between employees (known as a "tronc" system and run by a "troncmaster" with or without the support of the employer).

Contact

To discuss employment law issues, contact Susan Mayall on 0161 785 3500 or email enquiries@pearsonlegal.co.uk.

Posted 9 September 2016

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