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Bar & Restaurant Work: Ownership of Tips

By: Jeff Durham - Updated: 2 Aug 2017 | 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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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
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 @ 11:47 PM
@Ness94 - As specified in the article, 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. I have included a gov.uk link that should give you more information here. You may also want to look into your staff handbook in order to see what your company policy is on this, and what you signed and agreed to when starting the company. I hope this helps.
Studentastic - 30-Jul-15 @ 12:08 PM
I work as a waitress in the hotel and we have been putting our tips in a jar with the intention to get a few drinks and some pizza for us all at a later date. The HR manager has got wind of this and has taken out tips from us because she said it's illegal to keep tips in a jar. Can she do that?
Ness94 - 28-Jul-15 @ 12:59 PM
I have 2 questions. If the tips in a restaurant are pooled together to pay for a staff meal out does tax still need to be paid on it? (The staff don't get a cash handout as such the whole pot pays for everyone to go out together). Secondly can the employer stop staff receiving tips and instead treat them as a donation to the company or a charity? Thanks.
Chris - 16-Jul-15 @ 9:01 PM
@Lonnieuk - The Unite, UK, runs a fairer tips campaign, see link here. Unfortunately, money paid through a service charge, of via credit card becomes the property of the employer and it is up to the employer how it distributes this money.
Studentastic - 3-Jul-15 @ 10:25 AM
Hi I work for a large restaurant chain that puts an optional 10% service charge on the bill. When a customer asks to remove this and tip us personally the management then take the 10% off and enter the amount given as a manual service charge. We have no tronc and at no point do we get any share of this money. They say it pays for staff food., even though we only get food on an 8 hour shift and they limit our shifts to 6 hour splits so we don't get any. As far as i knew if a customer chose to tip a wait personally it was classed as a gift therefore is it theft fir them to take it off us?
Lonnieuk - 3-Jul-15 @ 3:45 AM
HELLO MY DAUGHTER WORKS AT BAKERY BOOTLE WHO MAKE STAFF PUT ALL TIPS IN CHARITY BOX AND ARE NOT ALLOWED TO EXCEPT A SHARE OUT THESE STAFF WORK UNDER INTENSE PRESSHER TO MEET QUOTERS THEY EVEN FORCE STAFF TO WORK LONGER HOURS WITHOUT THE PAY THAT THEY SHOULD GET.£1000S WORTH OF FOOD IS THROWEN OUT EACH DAY BECAUSE THEY DONT WHANT TO SELL IT AT END OF DAY HALF PRICE MONEY WHICH STAFF WOULD BENIFFIT FROM EVAN CHARITTYS INSTEAD OF STOPPING STAFF WHO WORK VERY HARD FOR.THIS IS MORE LIKE THE SWEAT SHOPS OUR GOVENMENT COMPLAIN ABOUT OF ORTHER COUNTRYS DISGUSTING WHATCH THAT WOMEN MAN CHILD STARV IN THE 20TH CENTRY GREED IS THE WORD WITHOUT STAFF THEY WILL NOT GET RICHER
MACK - 17-Jun-15 @ 6:57 PM
@Katey - While there are best practice guidelines regarding tips, there is still no legal requirement for employers to pass tips on to staff, despite unions trying to fight for this. I have included a link to: the gov.uk article, national minimum wage: code of best practice on service charges, tips, gratuities and cover charges here. I hope this helps.
Studentastic - 19-May-15 @ 12:50 PM
I work in a hotel breakfast chef and housekeeper also do baking.our employers don't put tips in pot to be shared but takes it all and gives to her daughter who only works now and again at weekends, because she is on benefits .even when the daughter isn't there she has been known to take as much as £50 both Friday and Saturday nights leaving nothing for her hard workingstaff is this legal? Also I have discovered that any guests paying by card, and leaving a tip this way,money doesn't come back to staff but they say they are within rights to keep for themselves. Ther is nothing on show in bar or restraunt in writing to let customers know what happens to the tips
Katey - 15-May-15 @ 7:02 PM
@Paula - I am sorry to hear this, especially when it was done in front of another member of staff who could vouch for her. I think in this case she should give Acas a call via the link herewhere she can get some professional advice on the best way forward. I hope this helps.
Studentastic - 13-May-15 @ 12:35 PM
My daughter is the assistant manager at Costa coffee, they all put the tips together to be divided at a later stage and they're kept in the safe at work, recently a member of staff was asked to stay later at work which then entitled her to a break, as she was only meant to be doing a shorter shift didn't bring any money into work, so my daughter as assistant manager took £10 out of the tips so she could go and get food and told her to replace it on Friday when she got paid, (as the girl is diabetic so needs to eat regularly ), and my daughter has seen the manager do this to other staff and didn't think that it would be a problem, when she went in the next day the manager called her into the office for an informal chat, then asked her why she had taken£10 out of the tip jar, my daughter explained why she had done this, this manager then went on to suspend her, today they have sacked her without a disaplinary procedure, I was wondering have the tips got anything to do with the employer. Please help because I'm fuming.
Paula - 11-May-15 @ 4:52 PM
@donwatkins - why on earth would you want to do that? Tips are and essential and helpful to the bar staff's wages especially when they earn so little.
Helen - 20-Mar-15 @ 12:53 PM
Can an employer in a public house stop employees taking Tips
donwatkins - 18-Mar-15 @ 7:28 PM
So, what should staff do if the restaurant has a tronc but the restaurant keeps 100% of the tips? At the particular restaurant I am thinking of, the staff are required to put the tips into the tronc and the amount collected is used as a measure of how well the staff are working.
Max - 15-Jun-14 @ 5:44 PM
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