Matthew Wyatt FCA assesses the distribution of staff tips and how proprietors can operate the tronc scheme properly.
The treatment of tips and gratuities has become a sensitive area for the hospitality industry. The government has waded into this matter, by publicly insisting restaurants pay their staff the tips they receive, after it emerged that many high street chains operate internal schemes that siphon off money from gratuities. One such chain, Giraffe, having been revealed to be taking a 10% administration fee on tips, put an immediate halt to this practice.
Many in the public see this development in an unethical light as it hurts the income of people in what is viewed traditionally as low paid work. Hence the government's comments about tips belonging to staff and taking a serious look at the practices of some restaurants.
More often than not we come across proprietors of growing businesses who make the usual errors when administering a Tronc scheme. So, with that in mind we’ve produced this post to guide you on how to handle tips in a legitimate, fair and lawful manner.
Why being legal isn’t enough
Given the revelations exposing chains such as Cafe Rouge, Prezzo, Strada, Pizza Express, ASK, Zizzi and Côte, it’s time the hospitality industry put in place new procedures to clear up any misunderstandings surrounding the administration of tips and the tronc, once and for all.
Like MPs expenses and in a similar fashion to the topic of tax avoidance, explaining that current practices are within the law simply doesn’t pass muster anymore with either customers or staff. Recent years have seen a sea change in attitude whereby just operating within the law will no longer suffice. There is now something of a moral agenda centred on the principles upon which a business operates.
You need to be seen to be doing the right thing which means operating within the spirit of the regulations. If customers find an issue about your business that they view as outside of their moral compass, they’ll vote with their feet and take their custom elsewhere. That means the distribution of tips is an important matter that you need to review and address where necessary.
Some viable solutions for the treatment of tips and gratuities
Firstly all staff should receive at least the living wage. Then any tips or service charges that are collected, be that cash or credit card transactions, should be shared out amongst all the staff on an agreed basis.
The emphasis on all staff because an exceptional meal experience isn’t provided just by great waiters but is the result of the kitchen and service staff working as a team in harmony.
Can you make any legitimate deductions?
Perhaps the only deductions allowed from the pool of tips and service charges by employers should cover credit card charges and fraudulent transactions which occur from time to time. That may all seem very simple but more often than not breaking things down to basic principles is the best way to formulate viable solutions.
If these policies were implemented throughout the trade then it would do a lot to improve the image of the hospitality industry as a good and fair employer.
The content of this post is up to date and relevant as at 26/01/2017.
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