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Bar & Restaurant Work: Ownership of Tips

By: Jeff Durham - Updated: 15 Jul 2018 | comments*Discuss
 
Bar & Restaurant Work: Ownership Of Tips

Many people work within the hospitality industry in jobs such as bartending or waiting-on in restaurants and although their basic hourly wage is often set at minimum wage, they can often double their income and earn even more than double as a result of the tips or 'gratuities' they receive from customers.

Difference Between Tips and Service Charges

Tips are given voluntarily by customers to staff as a reward for the service they've received. This amount is discretionary here in the UK and not compulsory, unlike some other countries where, though also not compulsory, a certain percentage of the overall bill is usually added and left as a tip if the service has been good.

Tips are usually administered in one of two ways. The proprietor of the hotel, bar, pub or restaurant will either allow staff to collect tips individually or they'll be collected in what's known as a 'tronc'. This term derives from the French meaning 'collection box' often referred to in the UK as the 'tip jug'. In this scenario, the tips might have been intended for a specific individual but they will be required to place any tips in the tronc to be distributed amongst the staff at a later time. The tronc will be run by a member of staff (troncmaster) who is acting independently of the employer. If the company uses a tronc, it's for the troncmaster (who cannot be the employer or a director of the company) to stipulate how the tips are divided up. If the employer does not have any say on how the tips are shared out, then the tips are not subject to National Insurance (NI) contributions although they are still legally liable for tax which should be paid via the troncmaster if he/she is responsible for dividing and sharing the tips.

Service charges, on the other hand, are compulsory additions to the price charged for a service and, in the hospitality industry, they are usually between 10% and 15% of the total cost of the bill. These are collected by the employer and, if shared amongst the employees via the payroll, they are subject to both tax and NI.

HM Revenue & Customs Implications

Many employers and employees are often guilty of 'overlooking' tips and gratuities when it comes to tax and NI and employees in particular often mistakenly view tips as a 'cash in hand bonus' to their wages. However, it's important to state that ignorance is no escape from the law and mistakes relating to this area can be very costly to an employer if investigated by HMRC and found to be a contravention of the law.

The key things to remember are that income tax is due on all tips, no matter how they are given. If tips are offered in cash from the customer directly to the employee, then the employee should declare them for tax purposes. If the tips come by way of being added to a bill paid for by credit card, then it's the employer's duty to declare them for tax.

If any tronc has not been formally registered with the Inland Revenue, then the business is responsible for deducting the tax and if it doesn't want to be liable for NI contributions too, it must ensure that it has no influence on the way by which the tips are divided. This can be done by holding a written record signed by the staff outlining how they themselves have decided to divide the tips.

The HMRC has recently revised its guidelines on tips and troncs and more detailed information can be found on its website or by obtaining the leaflet E24.

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[Add a Comment]
Hello, I would like to ask about tips in the restaurant I work for, managers and waiters receive a chefs and kitchen porter now, no contract on this subject, as it is legally bund.
robert sadza - 15-Jul-18 @ 7:40 PM
Zara - Your Question:
Hi, I've been working at Everyman Cinema what works like a restaurant and bar, we serve food and drinks but you're watching a film. (Thought I explain if some people haven't heard of the company yet). Our venue is having a staff party and they'll be using tips money and won money from an upselling competition toward this event. Unfortunately I cannot make it due to family issues. I've talked to several managers about it and even mentioning that they're using our tips money all they said is they can't do anything about it and it's not their fault that I can't make it. Now if I'm well aware they can't keep the tips money from me as I'm a member a staff as well as the others. Is there anything I can do about it at all? Would very much appreciate any help. Thank you

Our Response:
Your employer should have a policy on how tips are handled, you may ask to look at this, or you may find it in the terms and conditions of your employment contract. This should give you the answer.
Studentastic - 30-Apr-18 @ 3:39 PM
Hi, I've been working at Everyman Cinema what works like a restaurant and bar, we serve food and drinks but you're watching a film. (Thought I explain if some people haven't heard of the company yet). Our venue is having a staff party and they'll be using tips money and won money from an upselling competition toward this event. Unfortunately I cannot make it due to family issues. I've talked to several managers about it and even mentioning that they're using our tips money all they said is they can't do anything about it and it's not their fault that I can't make it...Now if I'm well aware they can't keep the tips money from me as I'm a member a staff as well as the others. Is there anything I can do about it at all? Would very much appreciate any help. Thank you
Zara - 27-Apr-18 @ 7:53 PM
Cazper - Your Question:
I work in a night club and I was wondering is my manager aloud to take my tips off me we do not have a tonc jar our tips are our tips but is my manager or boss aloud to take my tips off me

Our Response:
All workers should be fully informed on the distribution and breakdown of service charges, tips, gratuities and cover charges and the level and purpose of any deductions. Business should seek to reach agreement with workers on any change of policy. Therefore, you would have to ask your employer what the company policy is. You can see more via the link here , if you wish to find out what the code of best practice is.
Studentastic - 17-Apr-18 @ 3:19 PM
I have been working as a waitress for a year now and we share all the tips which is fine but I found out that the company I work for does not pay tax as they change there name all the time and as for the times it's about how many hours you do not how much tips we get off customers it's ment to be £0.50 per hour but it's less than that
Lizzy - 17-Apr-18 @ 2:20 PM
Keane - Your Question:
I have been working at a restaurant as a Kitchen Porter for 8 months. Today I found out that everyone but me gets tipped. All other staff (including chefs and management) get tips distributed between and I’m wondering if this is legal or in any way fair? (I have never been given any extra money from them)

Our Response:
You would have to speak to your line manager directly regarding this matter. As tips are unregulated payments, there are no specific rules about their distribution, please see link here.
Studentastic - 16-Apr-18 @ 10:44 AM
I have been working at a restaurant as a Kitchen Porter for 8 months. Today I found out that everyone but me gets tipped. All other staff (including chefs and management) get tips distributed between and I’m wondering if this is legal or in any way fair? (I have never been given any extra money from them)
Keane - 15-Apr-18 @ 1:38 AM
I work in a night club and I was wondering is my manager aloud to take my tips off me we do not have a tonc jar our tips are our tips but is my manager or boss aloud to take my tips off me
Cazper - 14-Apr-18 @ 6:13 PM
I am 17 and work in a bar waitressing and washing up. I feel like the tips I earn get distributed unfairly since they are split between me, and the two owners (the chef and bartender). I would like to know if they legally have the right to do this.
deanna - 31-Mar-18 @ 8:48 PM
tiggerr - Your Question:
I would like to ask if my boss/owner of the restaurant can keep all the electronic tips that the costumers leave. this represents 99% of the tips.also he did not gave any of this info when people start working for then. can he do this? is it legal?thank you

Our Response:
The government has a Code of Best Practice on tips that says how your employer should handle them. It’s voluntary - your employer doesn’t have to follow it - but if they do, they should have a policy on tips, please see gov.uk link here , for further information.
Studentastic - 12-Mar-18 @ 9:48 AM
i would like to ask if my boss/owner of the restaurant can keep all the electronic tips that the costumers leave. this represents 99% of the tips. also he did not gave any of this info when people start working for then. can he do this? is it legal? thank you
tiggerr - 11-Mar-18 @ 11:56 AM
Mona - Your Question:
I am working as a front desk operator in an organization.just set up 2 months ago. n when people give the tip amount in my hands after partying n sd this is for the staff members.bt all gt d tip bt I was sd that front desk does not gets any tip.is it true.or are they unfair to me.

Our Response:
You would have to ask your employer what the company policy is and whether the tips are shared. There are no set rules regarding this matter.
Studentastic - 13-Feb-18 @ 9:25 AM
I am working as a front desk operator in an organization ..just set up 2 months ago.. n when people give the tip amount in my hands after partying n sd this is for the staff members..bt all gt d tip bt I was sd that front desk does not gets any tip..is it true..or are they unfair to me..
Mona - 12-Feb-18 @ 2:28 PM
Ez - Your Question:
Hello, I’m working in a restaurant at the moment. I’m starting to feel terrible working there because of how they operate the tips. I’ve been working there for 3 months and I’ve had suspicions about the tipping system because I only ever get around £20-£30 during the week. I’ve just recently found out that my managers would count all the tips as a whole and then split them up to the staff according to how much hours they worked. That is what I’m worried about because the tips that I would get from customers during Friday and Saturday which is the busiest days would also be shared to the staff who weren’t even working at those days. I feel that it’s really unfair because some nights there’s just me and a manager working and it could get really busy so both of us would get a lot of tips from the customers but those tips will also be shared to everyone. Is there anything I could do about this? Legality wise? Plus these tips are not even recorded in our payslips which is even more worrying because there could be more tips going into someone else’s pocket.

Our Response:
I can only direct you to the gov.uk link here for further information, as it is a tricky arena to give any set/concrete advice, as non exists.
Studentastic - 6-Feb-18 @ 12:55 PM
Hello, I’m working in a restaurant at the moment. I’m starting to feel terrible working there because of how they operate the tips. I’ve been working there for 3 months and I’ve had suspicions about the tipping system because I only ever get around £20-£30 during the week. I’ve just recently found out that my managers would count all the tips as a whole and then split them up to the staff according to how much hours they worked. That is what I’m worried about because the tips that I would get from customers during Friday and Saturday which is the busiest days would also be shared to the staff who weren’t even working at those days. I feel that it’s really unfair because some nights there’s just me and a manager working and it could get really busy so both of us would get a lot of tips from the customers but those tips will also be shared to everyone. Is there anything I could do about this? Legality wise? Plus these tips are not even recorded in our payslips which is even more worrying because there could be more tips going into someone else’s pocket.
Ez - 30-Jan-18 @ 4:31 AM
Work as a Head Chef....over 10 yrs in one place now. Tips are collectedby Gm and owner. Thusfar my kitchen team received £160 over those years. Knowing full well tips are taken every day , I been told by Gm tips are not for the Chefs.....he keeps it to himself
Boss - 2-Aug-17 @ 5:11 AM
Hi. A company I am working with at a few of the UK festivals says that all tips given will be paid to a local charty. Is this even legal? Thought staff tips were for the staff? Presuming that the tips are actually being given to a charity that is... Can I ask for proof of said tips actually being given to a charity? Thanks
FestivalBar - 21-Jul-17 @ 6:18 PM
I've worked for pub serving food over a year we put all tips in jar that go upstairs not seen again. I believe should be shared equally to all staff working during food service. When asking about tips am told we use all years tips to go on staff Christmas meal. We did this only using 25%of our tips we now 6months into our 2nd year tips continue to build our employer even had cheek to say someone steal tip money during periods we are quite so obviously not collecting amounts that satisfy them. How much do they want just don't seem a fair way on staff. We just collecting money to pay for staff outing usually ends up all new starters benefiting from. So now I'm not happy to take tips from customers as not given to staff. Now Drinks have come issue having to record whom bought it on what day only have 7days to drink. Not be a drinker feel little over the top. So not only keep our tips keep our drinks too.
Jo - 24-Jun-17 @ 10:22 AM
Hi. I'm a chef and work for a company that withholds tips to cover loss within the business. ie. Too many breakages - tips, GP not good enough - tips. In fact any excuse not to pay tips. I've not had tips now for four months as kitchen have been denied tips. However, employers have a share and the FOH team but generally it is with-held and put back in the business to offset against losses or errors. Is this legal practice
Panic - 6-Sep-16 @ 1:31 PM
I am working in Indian restaurantwhere tips is all taken by boss every day.first 4 months I did not got tips. Later they started putting 30 pound per week. As as tip and service charge collected 4000pound per week . As I am full timer working 55hrs to 56hrs per week. I get 30 per person week. Please guide me is it justice or not . What is solutionswithout letting owner knew. Other wise they torture me by differentmeans. Any legal help without any body knows. All are treated as same.same part timers Regards Lisa
Lisa - 5-Aug-16 @ 8:23 AM
Are managers of a hotel/resturant allowed the tips that the waitresses make? The manager's on a salary? They take the tips whenever the tills are down or when someone walks out of the resturant? I dont know the legal properties so please help!
Lwbers - 6-Mar-16 @ 9:56 PM
I work in a restaurant. Customers leave cash tips which is pooled between us. In February this year our tips were witheld due to new guidelines which says tips must now be taxed. 10 months on we have just been paid the tips through payroll. This now has to be declared to tax credits and affects how tax credits are paid for some employees. They have also stated that we won't be paid them again for another 12 months in a bid to stop us leaving. Is this legal?
Sally - 16-Dec-15 @ 9:21 AM
@son - there are no rules regarding tips, it depends upon the employer. How they put it through their books is up to them, some put it through as tips and charge an administration fee, even to the staff - it's shocking. On the other hand, restaurant staff should legally declare tips for tax purposes, this is where it becomes tricky! Ed
Ed - 2-Oct-15 @ 2:59 PM
My employer makes us put all tips (whether in cash or on a card) through to the till so it shows up as income on the x readings at the end of the dayThe establishment is a cafe, restaurant, pub and inn so there are quite a few members of staff.We then, if we are lucky, receive an envelope containing our monthly tips but normally 1 to 2 months later.It seems to me that the chefs get a standard tip each month and the rest of us get random amounts I suppose based on how well we have done and how many hours we have worked.It all seems a bit dodgy to me!Obviously they are putting it all through as income on their books so it is liable for tax too.Is this all legal?
son - 2-Oct-15 @ 10:56 AM
hi i work for a large restaurant which share the tips but any staff things like uniforms staff party. breakages mistakes new equipment customers walking without paying stock shortages all come out the tips also comes out back of house tips
rabster15 - 25-Sep-15 @ 3:44 PM
@zoebird - I have managed several restaurants and tipping differs significantly across establishments i.e some restaurants allow their staff to keep all tips, some charge an admin charge for tips that have come via debit or credit cards and other owners such as yours keep the card-processed tips. I can only suggest you quietly tell your customers that if they tip on their card it goes to the restaurant and not the staff. Most diners are against this and will leave a tip in cash instead, many even ask directly. In addition to your questions, one of the reasons this remains such a grey area is that in practice, the tips that go to staff should be liable for tax via the HMRC.
Ian - 15-Sep-15 @ 10:22 AM
I work in a small, family run restaurant. Our cash tips are all pooled together and they are split between front of house staff and kitchen staff which we receive monthly. We don't have a service charge included in the bill, but customers usually leave 10%. Customers sometimes leave their tip on card as we have a separate gratuity option on the card machine. I started in February 2015 and have never once received card tips. The members of staff who have been working longer than me, said they were promised card tips at Christmas 2014. When I have text my manager regarding card tips, she has ignored me and has been very ominous about explaining to us when we will receive card tips, if we even will receive them? If they are using the card tips for expenses for business, should they be staying this in the initial contract? Same as if we are supposed to receive them, should that be stated in writing also? Surely it's misinforming to the customers if they believe their card tips are going to us? The manager has stated to another member of staff that tips on card take a long time to process, is this true? I want to hand in my notice fairly soon, but don't want to leave until I know what's happening with out card tips! Please help!
zoebird - 14-Sep-15 @ 1:52 AM
my boss has stopped us from having tips until his stock is ok! Last week a man offered me a drink and the boss was walking past so I told him and he said I could take but don't let the others see, yesterday a customer said keep the change so I did and put it in my pocket the boss come upstairs and said can he have a word with me, he said he saw me on the camera put the money in my pocket and he could have me sacked for theft so I said last week you said do it but don't let anyone see so that is what I did is he right in saying he could sack me for theft
monka - 29-Aug-15 @ 12:31 PM
Hi, I used to work at an Indian restaurant and all the staff had to put any tips in a box but nobody ever got anything, I have seen the boss taking the money at the end of the night to himself a few times and I wonder can he do that??
Mags - 23-Aug-15 @ 5:06 AM
Hey, I work at a local bar/restaurant and none of the staff at work receive any tips. We all put the tips into a small pot (which is always in cash as we don't accept tips on card) and at the end of the night it is put in a locked box and afterwards is never seen again. They are suppose to get shared out between the staff but as far as we are aware our boss pockets it for himself. I have been there for over a year and never seen any of my tips and some others have been there longer. There are no signs telling customers that we don't receive them and if my boss found out we were warning customers I am sure he would probably be furious. My boss is the one in charge of the tips and the few who have gotten tips have had a hard time getting them having got into arguments with my boss to get them risking them their job. He has made it as hard as possible for them. I need my tips as this would help a lot towards my university studies as I don't get much student finance and my parents can't help me out but I am unsure what to do as as far as I am aware there is now law to say my boss has to give me them and an argument with him seems very intimidating for me. Any advice?
Lisa - 22-Aug-15 @ 11:48 PM
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