The benefits of a fair tipping system
There are big advantages to creating a fair system for tips however. By putting a good tipping system in place, you’ll be able to reward and incentivise staff. This will have a huge impact on morale while actively encouraging team work. Here are just three reasons why you should consider refining how you manage staff tips:
- A fair system will reward all employees, from front of house, to kitchen staff. This will create an atmosphere of inclusion and appreciation for hard work across the business
- It will evenly distribute tips across busy and less busy areas of the business. Certain factors will be out of your staff’s control. For instance, bad weather could force customers inside, leaving more exposed areas bare. By evening out tips each day, all your staff will be equally rewarded every shift giving more incentive to work hard.
- Hospitality businesses rely on teamwork. Despite a customer seeing the good work of one individual server, they’ve been supported by the team, and an even divide of tips in every case will create a fair way of rewarding all involved.
If you have a transparent tipping system in place, you can also make customers aware of how tips work. Confusion over tips and service charges can muddy the waters further from a customer’s perspective. By putting a clear notice up in your place of business, explaining what system is in place, staff and customers will feel assured that they are in-the-know.
Tip or service charge?
The difference between a tip and a service charge can leave many customers unsure of where their money is going. This issue can extend through the business, with staff also being uncertain of exactly how the money is split. This can only lead to a loss of confidence and bad feeling. It’s important to explain how a service charge is divided to staff and customers by way of a polite, visible notice, if you choose to implement one.
Service charges have been heavily criticised in recent years. As opposed to cash tips, which are often pooled together and distributed between staff, whether the system is deemed fair by employees or not, service charges are a direct payment to the business. This is often split in a variety of ways, leaving the staff with little in the way of a reward at the end of the process. From taking a percentage handling fee on credit card payments, to covering costs for breakages and till shortages, employers can use the service charge as they like. It’s reasons like this that have made fair tipping a major part of the fair hospitality charter.
Using a properly run tronc system
There are ways to create a more streamlined, and effective tipping system. A properly run tronc system is one of those, because it provides transparency, fair distribution and a way of directly rewarding staff, as opposed to taking tips from their pockets to benefit the business.
There are some badly run tronc systems out there, so it’s worth getting a basic understanding of what the differences between them are before you implement one. A fair system will give the employees complete visibility on how service charges and tips are split. Ultimately, you can choose how you want to incentivise your staff and this will depend on the business. If you want to create a sense of inclusion, a fair split across all staff on shift is one option. Or, you may want to reward higher performing employees to encourage a strong work ethic. Getting feedback from your staff on how they would like their tips to be managed will also give you a great starting point and allow employees to be part of the decision process.
Have a clear policy in place
Managing staff tips also comes down to communication. Having a clear policy in place and ensuring that all staff members are aware of it will make your employees feel in control of the process. Make sure your staff are all aware of the tax basics around tips, as set out by HMRC. In short, this includes:
- Income Tax has to be paid on any tips received
- National Insurance may also be due if the tips are managed through a tronc system or through the business as a service charge. This will change depending on how the tronc system is managed
- National Insurance is not applied to cash tips paid directly to a staff member
Summary
A properly run tipping system has many benefits for employees and businesses as a whole. Through incentivising staff, you’ll have a productive, happy workplace, and in turn, staff will feel appreciated and rewarded for their efforts. Aside from this, customers will feel confident that their tip is going to the right people, bolstering your reputation. Service charges on the other hand have attracted so much criticism, it’s important to be clear about your policy if you decide to implement one.
Deciding on the best way to distribute tips will be an individual choice depending on your business. Using a tronc system will enable you to create a fair, transparent system for all. This, coupled with clear communication on your policy, and how the tipping system works will enable you to focus on looking after your staff, and running your business effectively.