Can companies legally pool employees' tips?

p4girl

Hi,

Question I can't answer...

My nephew works behind the bar in the local airport departure lounge. He is a grafter, liked by all others, held in high regard by managemant and consistently the best at 'up selling' and pushing the special offers. He enjoys chatting to the passengers and is often tipped quite well.

His company have just announced that they plan to collect everyone's tips, tax them and then share out the money. Understandably, he's a little peeved!!!

I would have thought it sounds a little dodgy, but the company may be within their rights... at leasts legally if not morally!

As he says, where's the incentive for anyone to be courteous and efficient if you can't keep the tips you're given?

He asked me if there's a law either allowing or preventing this - and I don't know! Can anyone help?

SarEl

I'm sort of surprised this doesn't happen already. Tips are taxable - and should be declared. For this reason HMRC do not like employers who do not have some sort of system. But equally, they could come after an individual for not having declared tips and assess them on what tips they "think" they have had - so not a safe income at all. The downside of a sharing system like this is that you will pay NI as well as tax on the tips. But yes, the employer can do this - and may have been forced into it by some heavt handed hinting from HMRC.

lalli_pickle

Yup, this is encouraged by HMRC as they like to get the tax due on the tips.
If your nephew is peeved at this then presumably there are other people who dont make the effort, perhaps he could see this as an opportunity to encourage the layabouts to make an effort thereby increasing the income for everyone? It may turn out that by doing this everyone will earn more

p4girl

Thanks for quick replies. Nephew is a student and thinks it sucks! I agree, but I guess all he can do is go along with it -and hope the others at his work get tipped as well as he does!

lalli_pickle

http://www.hmrc.gov.uk/helpsheets/e24.pdf

This is HMRC guidance. Might be worth suggesting to the employer that each staff member maintains their own tip jar and is responsible for tax on it.

Reason being that it appears if tips are taxed through the payroll the employer will have to pay employers NI on it adding a further 12.8% to their payroll bill.

Unless of course the company is planning on taking a share of the tips? (this is my cynical side coming out)

PasturesNew

Many employers pool the tips. It isn't fair for a lot of reasons, but also there are fair elements to it.

If, for example, he were the person who just tidied/cleaned/did the glasses, he'd be peeved the other guy just chatted to people all day and got to keep the tips. The staff are a team and pooling the tips is part of treating them as a team. However, there will always be those who 'earn' the money and there will always be slackers, but there will also be hard workers who weren't able to directly get the tips as they aren't 100% customer-facing.