The laws and unwritten rules around splitting restaurant tips
Tipping is a minefield for small businesses and you don’t want to upset your staff by handling it in an unsatisfactory way.
Everyone should be treated fairly but there are a number of different ways tips can be distributed.
If done poorly, it can lead to frustration amongst servers and back of the house employees.
There are a few ways to ensure tipping is fair and everyone is happy. The UK government have laid out a series of best practices to ensure you’re compliant and we’ve picked out our best tips below.
Swallow your card fees
Legally, restaurants have to provide employees with 100% of cash tips; however, until recently when it came to paying on card the rules got a little… hazy.
And nowadays everyone pays on card, especially since the pandemic with up to 80% of all restaurant bills charged to cards.
In the past, major high street chains like Pizza Express and Bella Italia have come under fire when it was discovered they were taking up to 40% of staff card tips.
After public outcry they quickly rolled back this policy, but without the bad PR it almost certainly would have stayed in place. Guess there is such a thing as bad press…
The good news (for servers) is that legislation announced in September 2021 has now made this practice illegal and employees get to retain 100% of their tips, no matter what payment method was used.
Set clear guidelines
You should have a written policy in place to cover tipping practices in your company and all employees should be informed of tip distribution and whether you pool or share tips when they are hired.
If you have a tronc master, they should be made aware of who this is and their role in the tipping distribution process.
Assign a tronc master
A tronc master is responsible for the management and distribution of pooled tips.
If you don’t have a tronc scheme, then both the restaurant and employee are expected to pay a national insurance contribution on the tip. But by appointing a tronc, you are bypassing the two pieces of law that make paying an NI contribution a requirement and instead the employee will just need to pay tax on the tip (rather than both), and the employer nothing.
This can save both the employee and the business hundreds to thousands a year. Although, of course, the employee is still required to pay income tax.
Who doesn’t love a legal loophole?
What is tip pooling?
Tip pooling is where all tips are collected and put into one large “pool”, managed by the tronc master who redistributes them among employees, including chefs, bar staff, busboys etc.
This way all staff members are fully compensated for their work, even if they did not take the actual bill at the end.
For example, when ordering a meal in a restaurant with a bar, one server may bring the food, but the bartender made your drink, the chef made the food and another server picks up your bill at the end as the first server has finished their shift.
Is it fair that only the final server benefits from the tip on your bill?
By tip pooling and working out who gets what, either as a percentage take, amount per £1000 or hours worked, everyone feels they’ve been treated fairly and been included in the equation.
Not that different from tip pooling, tip sharing is a more informal process without the use of a tronc master where everyone receives a set rate for a tip. In many restaurants this runs alongside tip pooling.
Don’t include the manager
Part of having a higher salary means you may lose out somewhere. In the restaurant and hospitality business, that’s usually in the tips.
So, sorry managers but it’s best overall to sit this one out.
So, how do you ensure tipping is managed fairly? There’s no one right answer to this but overall, the best way to ensure employees are happy and everyone gets what they feel they deserve is to set in place clear guidelines and rules on your tipping process.
Using tip pooling means both you and your employee avoids paying NI contributions, everyone gets a slice of the tip, as is fair as more than one person puts in the work, and the restaurant boosts morale by keeping a positive team atmosphere in play.