Payroll insight
● ● clear to consumers that they are voluntary ● ● received by workers
with the policymakers from BEIS to establish just what the pledge to ‘legislate to ban employers from making deductions from staff tips’ will mean for payroll. As part of this work we published a survey to members and the wider payroll profession during December and early January 2019 to gauge what the impact might be. ...a £10.00 tip could cost the employer as much as £3.75 in charges to pay over BEIS was keen to understand whether there will be any costs brought about by this policy and, if so, whether they are one-off costs to introduce the policy or whether there would be any ongoing costs, and also how long it might take for employers to bring about these changes. We asked how long it would take to make changes to the payroll system to reflect a change in tip distribution. Answers varied from half an hour to five hours and comments included: ● ● It will be the clients making the change. ● ● Audits may need to be run on the current system to implement any changes. ● ● Those not currently running a tronc scheme would have to set one up. ● ● Even those with a tronc scheme will need to check processes with troncmasters. One comment was interesting about those smaller organisations that could lose out when customers use credit cards to pay the tip and the credit card company still charges a fee for that part of the transaction. The example used was that a £10.00 tip could cost the employer as much as £3.75 in charges to pay over. We asked about workers’ contracts
and if they currently indicate how tips are distributed, and how long it would take to amend them if necessary. Answers varied but in the main it didn’t come across as hugely time intensive as contracts are updated from time to time anyway. We asked how long it would take to create records of how tips are distributed, if necessary and how long it would it take to maintain and update the records of how tips are distributed. Again, this came across as not being time intensive as most keep records anyway. It was not difficult to conclude that tronc schemes are without doubt the way forward, even taking into consideration the time it may take to set one up. It involves a one-off cost, but regardless of whether or not the employer deducts an admin fee, processing the tips through a tronc scheme do not attract employee or employer NICs. Of course, care must be taken, as with everything in the complexities of payroll processing. A troncmaster with a PAYE scheme may use the employer’s payroll to operate PAYE on his or her behalf but the tronc scheme must be run independently of the employer’s scheme. The associated PAYE records must also be kept entirely separate. ANMW trap On a final note – and as more of a reminder than anything – in any given pay period a worker’s pay must not fall below the national minimum wage (NMW). An employer who fails to ensure this could be faced with financial penalties and may be named-and- shamed in a government press release. We have certainly seen examples of well- known employers hitting the headlines for unintentionally paying below NMW rates. One of the most common payroll- related mistakes is including tips, gratuities, service charges and cover charges as part of minimum wage pay. They do not count even if they are administered through payroll and so they should never be included when calculating NMW pay for employees. n
● ● clear and transparent to consumers and workers in terms of how the payments are treated. No government response was ever published to this particular consultation. However, the subject came up again in the Taylor review of modern work practices (‘the Review’, launched in October 2016) which was tasked with ensuring that our system of employment rules are fit for the fast-changing world of work and to identify how employment practices need to change in order to keep pace with the modern business models. The Review was to consider the implications of new forms of work on employee rights and responsibilities as well as on employer freedoms and obligations, including views from workers and employers working in sectors such as the ‘gig’ and rural economies and manufacturing, to fully understand the impact of modern working practices and how different labour markets work. A very broad remit, with many outcomes. The government’s response to the Review – the Good work plan (published December 2018) pledged to “legislate to ban employers from making deductions from staff tips”, other than those required under tax law. The government believes “this legislation will offer a financial benefit to workers who will receive the tips they earn. Many of these workers are earning the minimum wage. It will also give consumers reassurance that the money they leave in good faith to reward service is going to the staff as they intended.” This does still cover the broad policy objectives initially laid out by BEIS so although consultation seemed to have come to standstill, it has reappeared through the Good work plan.
CIPP research We in the policy team have been liaising
Scenario
1
2
3
4
Amount of tip
£100.00
£100.00
£100.00
£100.00
Employer benefit
£67.50
(£16.92)
£0.00
£0.00
Employee benefit
£0.00
£59.04
£47.21
£80.00
Amount paid to Treasury
£32.50
£57.88
£52.79
£20.00
19
| Professional in Payroll, Pensions and Reward |
Issue 52 | July/August 2019
Made with FlippingBook - Online magazine maker