From 1 October 2024 it became mandatory for employers to pass on all tips on to workers without deductions, other than those legally required (such as tax or National Insurance). Removing the ability for employers to make deductions to cover their administration costs.
A statutory code of practice provides guidance to employers and workers on providing fair and transparent allocation and distribution of tips, gratuities and service charges. Employers should now have a written tipping policy, made available to all employees, demonstrating how they meet their duties.
Payments should be paid as soon as reasonably possible, and by the end of the following month.
Tips are not considered to form part of the basic pay even if there is a contractual right. Since 2009 tips have not counted towards minimum wage pay, and this remains.
Also without change is the treatment of tips for PAYE purposes. The table below gives detail on how tips should be treated for tax and National Insurance purposes.
Method of payment by customer | Distributed by | Tax | National Insurance | Reported by: |
Left on table | Direct to worker | Yes | No | Employee’s self assessment |
Employer | Yes | Yes | Usual payroll | |
Troncmaster | Yes | No | Tronc payroll | |
Paid by card | Employer | Yes | Yes | Usual payroll |
Troncmaster | Yes | No | Tronc payroll |
A tronc is a separate organised pay arrangement for tips, gratuities, and service charges. A troncmaster manages the tronc. The troncmaster cannot be the employer or anyone official within the company. The troncmaster is responsible for registering and managing a PAYE scheme, including associated submissions. This payroll is run separately to the payroll completed by the employer.
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