Since 1 October 2009, service charges, tips, gratuities and cover charges can no longer make up your National Minimum Wage pay. Find out what this means if you receive tips as part of your pay and what responsibilities your employer has.
Calculating your National Minimum Wage pay rate
Any service charges, tips, gratuities and cover charges (tips etc) you are paid must be on top of your National Minimum Wage (NMW) rate. This applies no matter where you work.
It also doesn't matter how your employer pays you the tips, including:
cash at the end of a shift
monthly in your pay packet
weekly divided between all of the staff
You should deduct the total of any tips etc from your gross pay before calculating if your pay is at least the NMW rate. Your gross pay is your pay before any deductions like tax, National Insurance or student loan.
Your employer's policy on tips etc at work
The Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges (the Code) sets out recommended approaches for businesses when handling service charges, tips and gratuities.
Businesses should make sure that workers understand the company policy on tips etc, including:
how tips etc are distributed between the company and workers, including between the workers themselves (for example, if a 'tronc' is used and who the 'troncmaster' is)
the amount of any deductions from tips etc and why the deductions are made
access to a written statement setting out the business's policies on tips etc, which can be provided to consumers
any deductions from tips etc to cover breakages, till shortages or customer walk-outs
the company's grievance procedure
There are also recommendations around the information your employer should consider giving to customers.
Written statement containing the company's policy
If your employer meets the Code, they should give you the company policy on tips etc in a written statement.
This statement should include:
how tips are distributed (eg if a 'tronc' is used)
if cash and card tips are treated differently
the name of the 'troncmaster' (if appropriate)
how much might be deducted for administration and what this covers
any other deductions
what happens during leave (eg holidays, sick leave, parental leave etc)
If your employer pays you tips without National Insurance deductions, they should tell you. This may impact your entitlement to certain social security benefits.
Changes to your company's policy on tips etc
The Code advises your employer to seek to reach agreement on changes to their policy on tips etc with workers.
Troncs and troncmasters
A tronc is an arrangement for pooling and distributing service charges, tips and gratuities to workers. The 'troncmaster' is the person who distributes the money from the tronc.