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National minimum wage, troncs and the Employment (Allocation of Tips) Bill

All tips appreciated

Key points

  • The Employment (Allocation of Tips) Bill imposes new obligations on employers along with rights for employees.
  • Tips should not be included as pay for the purposes of ensuring compliance with the applicable national minimum wage rate.
  • Compulsory service charges are always treated as part of pay when they are distributed to employees.
  • A tronc is a special arrangement that allows tips to be distributed with income tax deducted through PAYE but with no National Insurance due.
  • The new bill will oblige employers to ‘ensure that the total amount of the qualifying tips … is allocated fairly between workers’ which may create a National Insurance cost.

With the Employment (Allocation of Tips) Bill expected to be passed this spring now is the time for employers to understand what the new legislation means to them and to consider any actions necessary to ensure they are meeting their obligations.

The bill is progressing through...

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