How has COVID-19 impacted tipping?

Consider implementing discretionary service charge

With a reluctance from customers to use cash, coupled with some businesses refusing to take cash, many businesses are introducing a discretionary service charge. A discretionary service charge is an additional amount added to the customer’s bill before it’s handed over to the customer that must be presented as an entirely optional payment. 

I recently spoke with a large restaurant chain that reopened at the end of April, which applied discretionary service charges as a trial to several of their sites to make up for the reduced amount of cash tips given to staff. The sums gathered have been substantial and have outweighed the cash and credit card tips received by employees pre COVID-19. As such, and with the view to rewarding staff, they will be switching to discretionary service charges across all their restaurants. 

Introducing discretionary service charge will come at no extra cost to your business and if distributed correctly can also lend itself to significant cost savings for both businesses and staff.

How do I effectively share discretionary service charge?

The most efficient way to distribute discretionary service charge given by customers to staff is via a tronc scheme. By sharing discretionary service charge through a tronc, the need to pay NICs for both staff and businesses is removed providing significant savings for both. For example, for every £100 of service charge collected, HMRC typically take £13.80 from the employer and £12.00 from the employee, in NICs. By using a tronc scheme, both NIC costs are removed increasing employee take home and employer cashflow. 

There are also many other benefits to using a tronc such as staff can get up to 100% ownership of their hard-earned tips with a say in how they are shared out, the arrangement can be genuinely independent, free from employer interference, run for the benefit of staff, and can improve staff motivation and retention as employees feel valued and rewarded.

Using an independent troncmaster, such as Buzzacott, to handle the responsibility of distributing tips through a tronc will ensure they’re not subject to NICs. Whether you’re a new or an established business, we can help you set up and implement your bespoke tronc scheme quickly, within four weeks of your initial engagement. Get in touch today for a free consultation.

Call us today on +44 (0)20 7710 3389 or email buzzacotttroncmaster@buzzacott.co.uk. Alternatively, fill in the form below and a member of our team will be in touch.