8 Steps Hospitality Operators Need To Take Before 1ST OCTOBER 2024
The new tipping legislation is coming! You need to take these steps to remain compliant.
With the 1st of July fast approaching, the hospitality industry is bracing for a significant shift in tipping legislation that will reshape the way businesses manage and distribute tips and service charges.
As operators prepare to navigate these changes, ensuring compliance with the new regulations becomes paramount to avoid penalties and maintain trust with both staff and customers!
So to help, we thought we would outline 8 essential steps that hospitality operators need to take to ensure compliance before the new tipping legislation comes into effect! From establishing clear policies to reviewing existing tronc setups, each step is vital in preparing businesses for the regulatory changes ahead!
the legislation is live!
Step One:
Get Your Policies Straight
It’s time to put your intentions and policy down on paper. Your business should start making changes by crafting a clear and comprehensive policy that spells out exactly how tips and service charges are shared up in your business.
It’s really important that you don’t forget anyone—front of house, back of house, and even those agency folks should be covered in your policy.
This isn’t just about having a document to tick a box; you need to think about setting the tone for fairness and transparency in your businesses tipping practices. Take this as a real opportunity to address any skeletons you may or may not have hidden in your tronc closet.
Step Two: Talk about it
Like it or not clearly communicating your policy, and empowering your teams with knowledge about their rights in regard to the upcoming changes in tipping regulations is about to become an essential part of compliance.
We’d recommend hosting a meeting or training session to discuss the new rules and ensure everyone understands their implications, and that your staff are equipped to confidently address any inquiries or concerns from customers regarding tipping practices. By educating your staff, you not only ensure compliance but also demonstrate transparency. Encourage open communication and create a supportive environment where questions are welcomed and addressed.
With informed and prepared staff, you can navigate the transition smoothly and uphold your commitment to excellence in customer service.
Step Three:
Consider implementing a tronc
Now might be the perfect opportunity to explore the benefits of implementing a tronc system if you haven’t already done so.
Tronc arrangements offer a streamlined approach to tip distribution, aligning with the requirements of the new legislation while also benefiting your business and staff. We would definitely recommend taking the time to assess your options and determine whether integrating a tronc system could enhance your operations.
Implementing a tronc system offers several advantages over not having one:
- Compliance:
With the new legislation emphasising fair and transparent tip distribution, a tronc ensures that your business adheres to legal requirements, reducing the risk of penalties or disputes. Fairness and Transparency:
A compliant troncmaster must promote fairness by establishing clear guidelines for distributing tips among employees based on predetermined criteria, fostering transparency and trust.Efficiency When Choosing An Automated Solution:
Automated Tronc systems simplfy the process of tip allocation, saving time and resources compared to manual methods. This efficiency allows your staff and head office teams to focus on delivering exceptional service rather than managing tip distribution.Employee Satisfaction:
Fair and timely distribution of tips is an essential piece of the new legislation. By outsourcing a troncmaster – you’re putting the pressure of timely distribution on them, rather than your payroll teams.Financial Benefits:
Tronc systems can lead to huge cost savings for both employers and employees. By exempting tips from National Insurance contributions, businesses can reduce payroll expenses, while employees may enjoy increased take-home pay. TiPJAR can even work with you to reclaim up to 6 years worth of NICs you and your staff have already paid on tips.
Step 4: Review Your Existing Tronc Setup (If you do have one)
Got a tronc arrangement already running? Time for a check-up! Take a good look under the hood and make sure everything’s running smoothly. It’s critical that operators check that their setup aligns with the new rules and regulations.
- Double-Check for Compliance and Fairness:
Take a closer look at your tronc arrangement to see if it’s playing by the rules. Is it fair? Transparent? Fair pay for fair work, right? If you spot anything you’re unsure about, or places where things could be better, don’t hesitate to fix them or seek professional advice. It’s all about keeping things on the up-and-up and making sure everyone’s happy. - Spot Where You Can Boost Performance:
Look for any areas where your tronc could use a little boost. Maybe there’s a way to make things run smoother or shine a light on how tips are shared? Have no idea how yo’re going to sort the reporting aspect of the legislation? Keep your eyes peeled for ways to make your tronc even better and more effective for your team. - Get Your Team Involved
Time to rally the troops! We’re huge believers that it’s critical to have your team involved in the review and policy-writing process. Their feedback is gold. Open up the floor for ideas, suggestions, and any concerns they might have. After all, you’re all in this together! - Stay Committed to Getting Better:
Tronc management is an ongoing journey, not a one-time thing. Keep an eye on how things are going, and don’t be afraid to make changes along the way. Stay on top of the latest rules and regs, and keep your tronc in tip-top shape.
Step 5: Crunch the numbers
It’s time to dive into the numbers and assess how the legislation may affect your financial landscape. By thoroughly analysing the financial forecast, you can anticipate any potential hurdles and devise strategies to navigate them effectively.
With insights gleaned from your financial assessment, chart a strategic course for the future. Consider various scenarios and develop contingency plans to address any challenges that may arise. Planning ahead ensures you’re equipped to steer your business towards continued success.
Before implementing any changes, carefully review the terms and conditions associated with your tronc. Pay close attention to any hidden costs or contractual obligations that could impact your financial outlook. Thorough scrutiny now prevents unwelcome surprises later.
Things to consider when looking at how the legislation may impact your business financially:
- Have you been paying for National Insurance on tips? If you were not deciding distribution as an employer you and your staff could be eligible to claim up to 6 years of contributions back! We work closely with The Tronc Advisor to help operators claim these payments back, as well as set up a compliant tronc going forward.
- Take a look at how much distributing tips or running your tronc is currently costing you. We’d recommend shopping around if you’re using an external solution, or looking at how many man hours are put in by your payroll team if you’re running a tronc internally.
- If you previously kept a portion of tronc back as a reserve to distribute later whether to cover holidays or quieter periods, it’s simply no longer allowed. It’s time to be open with your team their income may fluctuate more going forwards, and consider whether it’s viable to pay tronc to team members who are not working – on holiday or other leave – when there’s no “tronc reserve” to cover this.
- You may even want to look at the balance between salary and tronc, and make sure you’re not over-reliant on tronc to achieve a sustainable and competitive overall reward. This may mean looking at service charge levels, pricing levels and salaries – as well as how tronc is shared out.
With salary negotiations involving tips becoming a big no-no, it’s time to review staff compensation strategies. With tronc no longer a part of salary negotiations, reassess how you’re going to attract and retain talent effectively.
- Consider the long-term financial impact. Look beyond immediate changes to anticipate how implementing a compliant tronc system can support your business’s financial health and sustainability over time.
Stay agile and responsive to changing circumstances, allowing you to adjust your approach as needed. By remaining adaptable, you can effectively navigate unforeseen challenges and seize new opportunities as they arise.
Step 6: Update Employee Contracts
Updating employee contracts is a critical step in ensuring compliance with the new tipping legislation. This involves reviewing existing contracts and making necessary amendments to reflect any changes in tip distribution policies mandated by the new laws.
Previously, it wasn’t uncommon to agree with staff to take a different wage or salary in exchange for a different share of tronc or tips, usually a reduced salary for a higher share of tronc. However, under the new legislation, you can’t leverage commitments on tronc distribution as part of salary negotiation. Staff wages or salary (whether for new starters or existing team members) must agreed without reference to tronc distributions.
Employers must clearly define the proper basic pay amount, excluding tips, in employee contracts to avoid liabilities. Failure to update contracts before the law takes effect could result in tips being considered part of the basic wage, subjecting the full amount to National Insurance contributions.
It’s also really crucial to ensure compliance with minimum and living wage laws, which prohibit salaries from being topped up with tips. Stay ahead of these changes by updating your employee contracts sooner, rather than later!
Step 7: Evaluate Technology Solutions
When preparing for the new tipping legislation, it’s essential to assess your technology solutions to ensure they align with compliance requirements. Tip management software and modern point-of-sale (POS) systems offer efficient ways to streamline tip distribution and enhance accuracy. These solutions can automate tip calculations, track tip amounts for reporting, and ensure transparent distribution among staff members. By leveraging technology, businesses can eliminate manual processes, reduce errors, and maintain comprehensive records of tip transactions.
Additionally, advanced POS & rota systems may integrate seamlessly with tronc management platforms, facilitating smooth communication and data exchange between systems.
Evaluating and investing in technology solutions tailored to your business needs can significantly improve operational efficiency and compliance readiness in preparation for the new legislation.
Step 8: Seek Professional Advice
Navigating the complexities of the new tipping legislation can be daunting. If you find yourself uncertain about its implications or how to ensure compliance, seeking professional advice is paramount.
Legal or financial experts with specialised knowledge of hospitality industry regulations can provide invaluable guidance and clarity. They can assess your specific situation, review your existing practices, and offer tailored recommendations to ensure compliance with the new legislation.
Professional advisors can also help interpret the intricacies of the law, address any potential risks, and implement effective strategies to adapt your operations accordingly.
At TiPJAR, we understand the importance of staying ahead of regulatory changes and ensuring compliance with the new tipping legislation. That’s why we work closely with Andy Hamman, the UK’s leading tronc expert at The Tronc Advisor.
We're here to help!
As the countdown to October 1st begins, hospitality operators must take proactive steps to ensure compliance with the upcoming tipping legislation. By following these essential guidelines, businesses can navigate the regulatory changes smoothly and maintain trust with both staff and customers.
At TiPJAR, we prioritise working closely with you and your team to establish fair, transparent, and compliant policies tailored to your business’s unique needs. Recognising the diversity of operations, we reject a one-size-fits-all approach and instead collaborate with you to craft policies that resonate with your values and team dynamics, whether you run a bustling restaurant, a cozy cafe, or a lively bar.
Our Supertronc product offers automated tracking of transactions and tip distributions, ensuring staff transparency and timely payments. By implementing a compliant tronc policy through TiPJAR, businesses can enjoy significant savings on National Insurance contributions while streamlining tip administration and maximizing cost-effectiveness. We’ve partnered with The Tronc Advisor to assist in recovering historical NICs, showcasing the tangible financial benefits of our solution, which is designed to ensure compliance effortlessly.
We’re here to support businesses every step of the way. If you’d like to find out more about our solutions – get in touch with the form here.
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