Fair tip distribution in hospitality – benefits and approaches

In September 2021 it was announced that new legislation was to be introduced that made it illegal for employers to withhold tips from workers. Unfortunately these plans were shelved just a few months later. But, that’s not to say that hospitality businesses shouldn’t be taking a fair approach to tip distribution. Here we discuss some of the benefits of fair tipping, different approaches you could take and how Rotaready can help. 

Benefits of distributing tips fairly

The benefits that come with fair tip distribution are probably pretty obvious… but here are a few of the key ones: 

• Exceptional customer service – If your team knows they’ll be receiving a share of the tips left by customers, they’ll be more motivated to deliver the best possible customer service in order to earn these tips. 
• Higher tip rates – If you make it clear to your customers that any tips they leave go to your team and are distributed fairly, they’ll be more likely to leave a tip in the first place.
• Better teamwork – By sharing tips across the entire team, including chefs, servers and bartenders, everyone will be driven by the same end goal. With everyone being rewarded for the hard work they put in, they’re more likely to work better as a team in order to deliver exceptional service and achieve higher tip rates as a result.
• Stronger relationships – Sharing tips fairly between your employees will help strengthen relationships between you and them, and across the team.

Approaches you could take

Every business is different and the approach you take to tip distribution will have to suit yours. Fortunately there are multiple ways you can share tips fairly between your employees. To name a few… 

Employees take home exactly what they are given…

This approach is where your team members take home exactly what they are given by the customers they serve. Whilst this approach is probably the easiest to manage, it runs the risk of being unfair. For example, the employee who gives the customer the bill and collects the tip, may not be the person who served them throughout the rest of their visit. It also means that the team members working in the kitchen or behind the bar, may miss out on tips altogether.

Tip pooling…

Tip pooling, or tronc, is where all tips are collected and then redistributed fairly between your employees. This can be done in a number of ways…

Fixed-rate

This is where you pay your employees a fixed amount. Meaning they know exactly what they’re going to be paid each week, regardless of the amount of tips you collect. Some weeks you may collect less tips than you’re paying your staff for, and others you might receive more. 

Hours worked

You can also base how much tip a team member receives on the number of hours they’ve worked. For example, each team member gets a share of the total tips, but the amount they receive is calculated pro-rata based on hours worked.

Points based

Similarly to the above, this is where everyone involved in the customer’s experience receives a portion of the tip based on the number of hours they have worked; but the amount they receive is also dictated by a points system. So someone with more points would receive a greater share of the tips than a colleague with less points; even if they have worked the same number of hours. Points can be based on things such as the section an employee works in, performance or seniority. For example, staff waiting tables may receive slightly more points than chefs. 

Rotaready & tronc

Rotaready’s tronc feature can help you calculate tronc automatically based on any of the three methods mentioned above. By using signed-off hours only, Rotaready ensures your tronc payments are always accurate and are paid at same time as your regular pay runs. You can find more information on the feature here. 

A note on taxation

We haven’t touched on taxes in this article, so it’s important to note that there are varying tax considerations depending on the approach you take. Naturally we’d recommend using Rotaready’s tronc feature and following the HMRC guidance on managing a tronc scheme. If you go down this route you can’t go too far wrong, but in any case we’d always recommend you take advice from a tax professional before establishing your tipping policy.

If you have any questions or would like to start using our tronc feature, feel free to get in touch via live chat or email us at team@rotaready.com.