Category: Budget

How TiPJAR Can Help Hospitality Operators Navigate the NICs Threshold Changes

Posted on by Hannah Bray

How TiPJAR Can Help Hospitality Operators Navigate the NICs Threshold Changes

A thought leadership piece by Dan Hawkie, Chief Commercial Officer at TiPJAR

The UK hospitality sector is facing yet another financial challenge, with over 774,000 hospitality workers set to be dragged into the new National Insurance Contributions (NICs) threshold from April 2025. This shift will cost the industry a staggering £1 billion, according to UKHospitality. As a sector already grappling with cost pressures, workforce challenges, and regulatory changes, these new NICs rules could significantly impact businesses’ bottom lines and ability to operate efficiently.

At TiPJAR, we understand the critical challenges this presents for hospitality operators. With the new Employment (Allocation of Tips) Act already creating ripples across the industry, operators need practical, compliant solutions to mitigate risks and streamline their operations. That’s where TiPJAR comes in. 

Here’s how we can help:

1. Automating Tronc Processes to Reduce NICs Impact

One of the key pain points for operators is managing Tronc schemes—a complex area that’s critical to ensuring compliance with NICs rules. TiPJAR’s automated Tronc solutions:

  • Eliminate Manual Errors: By automating the distribution of tips and service charges, we reduce the administrative burden and ensure accuracy in NICs reporting.
  • Reduce NICs Liability: Our compliant Tronc system ensures that eligible tips are excluded from employer NICs, reducing financial strain.
  • Enhance Transparency: Our platform provides clear, real-time reporting for both operators and team members, fostering trust and reducing disputes.
2. Increasing Tips as a Supplemental Income Source

With the NICs threshold changes, offering team members a supplemental income stream has never been more crucial. TiPJAR’s technology allows businesses to:

  • Boost Team Earnings: Empower employees to collect digital tips directly from customers, increasing their take-home pay without raising operational costs.
  • Drive Team Motivation: Higher tips lead to happier, more motivated teams, resulting in better customer experiences.
  • Simplify Tip Distribution: Our platform ensures tips are distributed fairly and transparently, improving staff satisfaction and retention.
3. Ensuring Compliance with the New Employment (Allocation of Tips) Act

Compliance is a top priority for operators as the new Employment (Allocation of Tips) Act takes effect. TiPJAR’s platform ensures:

  • Legal Compliance: Tips and service charges are allocated fairly and in line with the law, reducing the risk of fines or legal challenges.
  • Audit-Ready Records: Our system provides detailed records of tip allocation, ready for audit at any time.
  • Peace of Mind: Operators can focus on running their business, knowing their tip distribution complies with the latest regulations.
Facing Challenges Together

The upcoming NICs changes are undoubtedly a significant challenge for the hospitality sector, but they also present an opportunity to rethink and optimise how tips and Tronc schemes are managed. At TiPJAR, we’re committed to supporting operators through this period of transition, helping them stay compliant, reduce costs, and keep their teams motivated.

If you’re looking to future-proof your business against these changes, get in touch with us today to learn how TiPJAR can help.

Book A Demo

Book a chat with us today and hear how TiPJAR® software can help your business grow!

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Navigating the 2025 Budget: What Hospitality Businesses Need to Know

Posted on by Hannah Bray

Budget

TiPJAR - Ben thomas - ceo

The recent UK budget announcement for 2025 brought both challenges and opportunities for businesses in hospitality. With a rise in the National Minimum Wage, an increase in employer National Insurance Contributions (NICs), and adjusted business rates, these changes will significantly impact the bottom line for pubs, bars, and restaurants across the country. 

As a sector already operating on tight margins, hospitality businesses now face the dual task of managing higher costs while keeping their doors open and teams motivated. Let’s dive into what these changes mean for the industry and explore how businesses can adapt to stay resilient. 

National Minimum Wage Increase: Supporting Your Team in Challenging Times

The budget announced a 6.7% increase in the National Minimum Wage, which will rise to £12.21 an hour from April 2025. 

While this increase reflects the importance of providing workers with a fair income in light of rising living costs, it also creates new pressures for hospitality businesses. Industry commentators estimate that the cost per FTE employee will rise by around £2,500 per annum. 

Labour costs already represent a substantial portion of a hospitality business’s expenses, so these changes will likely strain operational budgets even further. For employers, balancing this wage increase with a commitment to providing excellent guest experiences may require thoughtful adjustments, whether through menu pricing, operational efficiencies, or careful workforce planning. 

NICs Increase and Threshold Reduction: Managing the Added Costs

From April 2025, the threshold for employer NICs will be reduced by 45% to £5,000 per annum. In addition, employer NICs will increase by 1.2%, adding over £600 in additional NICs per employee for businesses. 

This adjustment impacts not only payroll expenses but also overall staffing strategies, making it even more vital for hospitality businesses to streamline operations. 

Some businesses may look into more flexible staffing models, while others may choose to invest in technology that supports efficiency or offsets administrative costs. Regardless of the approach, finding solutions to navigate these added expenses will be essential. 

Business Rates Relief: A Welcome Breathing Space

The budget’s 40% relief on business rates for hospitality and leisure businesses, capped at £110,000, comes as a welcome reprieve. This measure, effective from April 2025, provides some relief against rising operational costs. 

For businesses eligible for this support, the additional capital could go toward staff training, technology upgrades, or even renovations to enhance the guest experience. 

While this relief won’t fully offset other rising costs for many, it offers some breathing room, enabling businesses to reinvest in areas that could lead to long-term operational resilience. 

Alcohol Duty Reduction: Incentivizing In-Venue Spending

The 1.7% reduction in alcohol duty on draught products is perhaps intended to encourage more in-venue spending. However, as it brings draught prices down by only around 1p per pint, most operators feel this is unlikely to make a significant impact. 

That said, it may signal further incentives to encourage more foot traffic or prompt patrons to stay longer, increasing revenue per customer. 

In a sector where customer experience is key, even a small duty reduction is welcome as a positive change. 

Staying Resilient Through the Changes

The hospitality industry has been called upon constantly in recent years to show resilience and adaptability. So far, it has not been found wanting, and tribute must be paid to the operators and teams that ensure our restaurants, bars, cafes, pubs, and hotels continue to offer a warm welcome and brilliant experiences. 

The 2025 budget brings both pressure points and some support measures. The key to moving forward, as always, is to focus on sustainable, long-term practices that strengthen businesses. 

At TiPJAR, we’re here to support hospitality businesses by offering a digital tipping solution that makes tip distribution easy, transparent, and compliant. By helping businesses fairly reward their teams, TiPJAR provides a way to foster team satisfaction and retention even amid budget constraints. We believe that, with the right tools and strategies, hospitality businesses can adapt to these changes and continue to deliver the brilliant experiences that keep guests coming back! 

So, let’s keep that momentum going and tackle these shifts together, creating workplaces that stay strong, inspired, and well-equipped for the future! 

We Are At A Tipping Point

Posted on by Angie Carney

We are at a tipping point

A thought leadership piece by Ben Thomas, CEO at TiPJAR

Whilst many in the industry have welcomed the new tips legislation as a needed levelling of the playing field for all, the truth for many is that the timing could not really be worse. 

Not only following some of the most challenging years in living memory (I won’t list what we’ve faced these past years because it’s frankly just too depressing) but now the 1st July deadline comes in the wake of the largest increase in minimum wage most of us can remember. Justifiable in the context of a cost-of-living crisis and lingering high inflation, but very, very hard to accommodate for already stretched hospitality businesses. 

Hospitality businesses have always been hard to run.  Margins are tight, competition is intense and the rate of failure has never been higher. 

So it shouldn’t surprise us that although most businesses publicly claim the service charges and tips they collect go to staff, the truth is most have been forced to adopt a policy of retaining some amount of tips and service charges historically.  The intention being to cover the substantial costs of getting this money to staff in a way that is “fair” (whatever that means in each circumstance) and recouping what they view as other legitimate costs for staff benefits. 

Regrettably, over time, some pushed this further than the government could tolerate.  Hence we’re now faced with a requirement that every penny of these funds is paid to staff, within a narrow time frame, and only to those staff (usually) who work in the place they were collected as their normal job. 

Those that retained some portion of the funds to cover costs now face a hole in the P&L. Others who took the view that head office or non-site staff should get a share too (after all they unquestionably contribute, so why shouldn’t they?) now face the government simply disagreeing with this practice, and big shortfall in head office salary budgets. 

I’ve probably heard every story around treatment of tips and service charges.  From 90% retained by the business (justified because it allows them to pay fair wages) through to head office team members whose salaries were up to 80% comprised of tronc (because they impact all the customers’ experience).   

But has the time has come for all of us to let go of judgement about any of this?  The “naming and shaming” and the blaming breaks my heart – because there is almost always a real, valid, struggling business at the centre fighting to grow, to thrive and trying their best to look after their people,  customers and investors.  Equally on the other side, the virtue-signalling and heckling of others just doesn’t help. 

So let’s stop, and instead can we put the energy into working out together how we get to where we now need to be? 

 Over the past few months we’ve seen the whole sector go through what feels like a classic change process.  First denial – disbelief that the government would possibly stick to such a seismic change.  Then anger and resistance, with real rage that even the card processing fee (money which we don’t even get) can be clawed back from the service charges or tips collected. 

It’s understandable that some are questing to move into exploration – and testing new approaches.  We’ve seen businesses – in my view bravely – try new things.  Some have included an optional additional charge on the bill rated as a percentage of spend, being up front this is to help fund the overall experience.  Unfortunately, the swift response from Customers and the press was not good.  We should be grateful to them.  Now we know. 

Others have trialled fixed cover charges – but have found it difficult to do this at a level that makes a difference, and again, customers are quick to challenge, less likely to then optionally tip or pay an optional service charge, and few have been able to maintain it. 

Given this, there really are only three things to think about if you have been operating a service charge with a retention for the business:  Whether or not to maintain it and at what level, and how much to increase your revenue or reduce costs as a result. 

Starting by understanding what level of service charge is needed to maintain what for your business is an acceptable level of tronc to competitively attract, retain and reward your on-site team is the first decision.  This is where the service charge should be set, because that is all we’re now allowed to do with it. 

If that creates disparity, because you were sharing across sites (now not allowed) you’ll need to review remuneration policy.  Perhaps there is a top up in lieu at delivery-heavy, low service charge sites. Unconventional, yes, but possibly necessity. 

Then, this will leave a shortfall – based on the wage increases you’ve needed, any portion of the service charge which previously may have funded head office or off-site staff distributions, and any amount you used to retain.  This can only be covered by increased revenue – price increases or for the brave, targeting growth and getting more customers through the door – or reducing costs if you’re lucky enough to have scope to do so. 

This is an uncomfortable reality. Yet as with so much in business, the winners will be those who are fastest to get to through the change process.  It’s time to push to reach acceptance and then build commitment to make these difficult decisions.   

Help is out there – in particular our partner business The Tronc Advisor is offering Propel subscribers a first-come-first-served discounted fixed price review of any operators’ current position, and can provide fast and simple feedback on the decisions they may need to consider. 

Working in the hospitality industry is a great privilege, a world full of wonderful people, incredible innovative businesses, and real passion for creating amazing life-enriching experiences for our guests.  Whilst the changes we’re facing are very challenging, I believe our sector is rich in tenacity, creativity and drive to overcome them, if we can work together with honesty, positivity and the considerable force of our collective will. 

Book A Demo

Book a chat with us today and hear how TiPJAR® software can help your business grow!

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