COMPLIANCE
Self-employed workers Although it’s clear in the new legislation that there’s no mandatory reason to include self-employed workers, it isn’t clear whether an employer can still choose to include self-employed people who aren’t covered under the Act. If an employer did choose to include a self-employed worker, when there’s no legal claim, would this leave the business open to legitimate complaints from workers and possible employment tribunals over their inclusion? How quickly tips must be paid out Tips must be allocated to workers by the end of the month following the one in which they have been taken. This will leave a very short timeframe in which to make payments and some companies may have to consider changing their pay periods / pay dates. We hope the timeline will be adjusted to simply be that all tips must be paid out 60 days from date of receipt. This would also make it easier to pay agency staff, where there’s usually an accounts payable process layered on top, which makes the proposed timeline even more difficult to meet. Crossing the i’s and dotting the t’s There are a couple of must-dos to ensure your business is prepared for the changes: l check that your employment contracts state the correct amount of basic pay and tips / service, and ensure whether it’s via tronc or not is clearly listed separately, either in contract, non-contractually or via tronc agreement l update your policy. Or, if you don’t have one, you can start to write it. If you have a tronc scheme, your troncmaster should have already done much of this work l consider how you will respond to data requests and take heed of laws around data protection. Keep thorough records but remember that some personal information will be protected under privacy laws. Ultimately, this legislation is a great step in ensuring employees receive their tips fairly and in a timely manner, but it has the potential to put added pressure on hospitality businesses who are already struggling. Even though there may be some amendments and further clarity to come, it's imperative as payroll professionals to familiarise yourself with the Code as it stands, so you can start implementing any changes by that 1 July deadline. n
one in which the tip was received into the business l ensure a fair allocation method is used, and if a tronc scheme is in place, ensure the troncmaster is acting fairly and within the rules of the legislation. One of the main concerns for hospitality employers is the impact this will have on their current payroll processing, as failure to follow the new legislation or where it’s found that tips haven’t been handled fairly and transparently could result in an employee taking their employer to a tribunal. "The introduction of the new legislation means employers will need to have a clear and fair process in place for managing tips,
due on the tips paid through the tronc. For businesses not already using a tronc scheme, this can be a powerful way to increase employees’ net pay and decrease employer costs. We believe most employers are already acting fairly and only recovering legitimate processing costs, which are clearly defined on invoices such as card transaction fees or professional fees. However, these deductions will no longer be allowed, so a tronc scheme can be helpful in mitigating some of the new costs. Ultimately, the introduction of the new legislation means employers will need to have a clear and fair process in place for managing tips, which has been communicated effectively to employees and supported by a formal policy. How is a fair allocation of tips defined? The aim of the law is to ensure fairness. But fairness as a concept is, of course, subjective. The new Code of Practice is not overly prescriptive in defining this, as all businesses distributing tips will have nuances to the operation of service, which could mean ‘fair’ looks different from business to business. The Statutory Code of Practice, which at the time of writing, is in draft form and is expected to become law, sets some detail around what constitutes fair and transparent distribution of tips and how employers are expected to apply the new law. There are several types of data which can be considered when defining a fair allocation method, such as an employee’s experience, responsibility, length of service, job role and seniority. Are there grey areas? Oh yes! The Code of Practice being in draft form has meant it’s been open to consultation. Here are some of the points we have raised directly through the government consultation as requiring more examples, clarification or attention in the final guidance: Pooling tips from apps / QR codes Tipping apps / QR code tips are mentioned under employer controlled / influenced. It isn’t yet clear whether, when the tips from these avenues are pooled into a fund, and the allocation has been automated into a system distribution, it is still employer controlled / influenced.
which has been communicated effectively to employees and supported by a formal policy"
Many hospitality businesses pay out tips in arrears, often for a mid-month to mid- month earnings period. If they have a first to the fifth of the month pay date, they may find they have to change this because it will put the payment date outside of the legal timeline for tips taken in prior months. An example If a business is paying hours worked and tips for the period 21 January to 20 February, with a pay date of 1 March, the tips from 21 January to 31 January will have been illegally held a day too long. Employers and their payroll teams or providers will need to review either the pay period or the pay date, and implement a plan to move to a legal timeline by 1 July. Employers who use a tronc scheme to distribute tips receive the benefits of the special pay arrangement, which means there’s no National Insurance contributions
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| Professional in Payroll, Pensions and Reward |
Issue 99 | April 2024
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