Most employers play right by their staff, but there are a few who do not when it comes to tipping in the hospitality and leisure sectors.
The Government has now introduced legislation that will see all tips go to staff, providing a financial boost to hospitality workers across the country, which in turn should provide stability for employers with less staff turnover.
The move is set to help around two million people working in one of the 190,000 businesses across the hospitality, leisure and services sectors.
Benefits for employers
With the shortage of staff facing those sectors, it’s more important than ever that employees feel they are being treated fairly. This has an advantage for employers who have happier employees who are less likely to leave, with the consequent benefits of experienced staff being able to keep customers happy.
One way of distributing tips and gratuities is through what’s known as a tronc system. It derived from an old French custom, where money was left in poor boxes, or troncs, to help the poor.
It is a system where the allocation of tips is controlled by someone called a troncmaster who not only is responsible for collection and distribution, but also informing HM Revenue & Customs (HMRC) for taxation purposes.
It can be an employee who must be independent of the business decision-making process, or it could be an outside business, which may be experienced in these matters. Your accountant will advise you on this.
While tips are taxable, a tronc system can allow them to be exempt from National Insurance.
Depending on the number of employees, it can get complicated, but your accountant can offer advice on how tronc schemes can benefit both staff and employers when correctly set up and administered.
HMRC guidance says that if your employees get payments through a troncmaster that person must:
For advice on taxation matters, contact our expert team today.