Handling tips at work :Cross Stitch – Employment

Since 1 October 2009, service charges, tips, gratuities and cover charges can no longer make up your National Minimum Wage pay. Find out what this means if you receive tips as part of your pay and what responsibilities your employer has.

Any service charges, tips, gratuities and cover charges (tips etc) you are paid must be on top of your National Minimum Wage (NMW) rate. This applies no matter where you work.

It also doesn’t matter how your employer pays you the tips, including:

  • cash at the end of a shift
  • monthly in your pay packet
  • weekly divided between all of the staff

You should deduct the total of any tips etc from your gross pay before calculating if your pay is at least the NMW rate. Your gross pay is your pay before any deductions like tax, National Insurance or student loan.

The Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges (the Code) sets out recommended approaches for businesses when handling service charges, tips and gratuities.

Businesses should make sure that workers understand the company policy on tips etc, including:

  • how tips etc are distributed between the company and workers, including between the workers themselves (for example, if a ‘tronc’ is used and who the ‘troncmaster’ is)
  • the amount of any deductions from tips etc and why the deductions are made
  • access to a written statement setting out the business’s policies on tips etc, which can be provided to consumers
  • any deductions from tips etc to cover breakages, till shortages or customer walk-outs
  • the company’s grievance procedure

There are also recommendations around the information your employer should consider giving to customers.

If your employer meets the Code, they should give you the company policy on tips etc in a written statement.

This statement should include:

  • how tips are distributed (eg if a ‘tronc’ is used)
  • if cash and card tips are treated differently
  • the name of the ‘troncmaster’ (if appropriate)
  • how much might be deducted for administration and what this covers
  • any other deductions
  • what happens during leave (eg holidays, sick leave, parental leave etc)

If your employer pays you tips without National Insurance deductions, they should tell you. This may impact your entitlement to certain social security benefits.

The Code advises your employer to seek to reach agreement on changes to their policy on tips etc with workers.