Tip Pooling in the UK: The Who, What and Why

Management 11 minute read 05 October 2020

Tipping dates back to the 18th century, where customers in English pubs would attach coins to notes that would be handed to the water.

This monetary incentive was designed “To Insure Promptness”, thus the term “TIP” was born.

Thank us later for that gem of a dinner table factoid.

 Related Article: The Psychology of Restaurant Tipping by Cornell University School of Hotel Administration

Further reading (we promise it’s more interesting than it sounds): The Psychology of Restaurant Tipping by Cornell University School of Hotel Administration (PDF)

Tipping has evolved considerably since then, as has the industries within which it can be found. In fact, arguably, when those coins were first attached to notes in English pubs, few would have predicted the same generosity to be expected when enlisting the complementary services of a hotel concierge or saying “thank you” to a home removal company.

Unfortunately, tipping has received a fair bit of criticism and rules bestowed upon it. In some cases, this has resulted in employees not receiving their fair share, and businesses inadvertently implementing tip policies that act as neither a reward nor an incentive.

Thankfully, there is such a thing as tip pooling, which can be a brilliant solution for employees who regularly receive tips.

What is tip pooling?

Tip pool distribution is when either a portion of - or collection of all - tips collected during a shift are put into one ‘pot’. The contents of that pot are then redistributed among all employees.

The benefit of a tip pool is that no one is left out; all staff members are fairly compensated for their work based on the level of gratuity provided by the customers as a whole.

Tip pooling in the UK - the law

Things get a little more complex when it comes to tipping laws in the US and UK. In the latter, for instance, 165,000 businesses pay tips to their workers, which demonstrates how what was once a friendly ‘off-record’ transaction between customer and server has transitioned to a common, monitored form of remuneration.

In the UK, tip pooling falls under the term ‘tronc’, which is believed to come from the French phrase ‘tronc des pauvres’, or ‘poor box’.

A tronc is essentially a pay arrangement which restaurants use to distribute trips, service charges and gratuities fairly among staff. They can be used for both (or a combination of) tip pooling and tip sharing.

In some instances, payments made via a tronc scheme are exempt from National Insurance contributions (NICs). This is the case if the payment is:

To run a tronc in your business, you’re best off creating a troncmaster (often a senior member of the waiting staff) who’s responsible for collecting and distributing tips. By doing it this way, you should fulfil the two requirements above and ensure the payments can be made without deductions for NICs.

Odd name aside, a tronc is recognised by HMRC as good business practice, and highly recommended if you want to comply with the law (who doesn’t?!) and ensure staff are fairly rewarded via their tips.

 Further details: Tips, Gratuities, Service Charges and Troncs (HMRC)

Why is tip pooling fair?

Let’s think about a super-busy coffee shop that employs multiple staff with varying levels of responsibility.

Dave is in charge of taking drinks orders, which are passed onto Jennifer to be brewed. However, there’s also Lisa and Paul who deliver said order to the table and check in to ensure everything’s ok before passing the bill onto David who processes it through the POS.

If the customer tips Lisa, where does that leave everyone else in the chain? By instead placing that tip into a pool and distributing it equally among all team members, everyone gets rewarded fairly.

It’s hard to argue with the logic, right?

Tip pooling is also recognised by the UK government, and therefore is bound by a number of rules (we’ll get to those later), which ensures neither employer or employee can ‘game’ the system and extract more out of it than they’re due.

Is tip pooling the same as tip sharing?

At this point, you might be thinking “well, this just sounds like tip sharing, and we already do that”. But, they’re not the same.

As it turns out, tip pooling is considerably different to tip sharing. Sometimes referred to as ‘tipping out’ in the US (how long before that term makes its way over here?), tip sharing is when tips are distributed among employees at a set rate for each person.

These rates are usually a percentage of the total tip pot, broken down by tips, sales or category receipts and defined by the employer.

Tip sharing and tip pooling aren’t seen as competing options; they can exist happily in the same operation.

How to distribute tips in tip pooling

So, you want to implement a tip pooling scheme at your business, but how do you distribute the money fairly?

Thankfully, there are a number of methods for tip distribution, whose merits will vary depending on your operation and the way in which the team is setup to work.

The most popular method above is the percentage, regardless of hours. However, the right method for your business depends entirely on the makeup of your operation, your own beliefs about tipping and how the team is most likely to be incentivised.

The pros and cons of tip pooling

Not convinced about tip pooling? It isn’t for every business, which is why we’ll finish this guide with the main pros and cons of this form of tip distribution.

Pros of tip pooling

Here’s why you might want to implement tip pooling:

Cons of tip pooling

Your fears about tip pooling might be realised if you’re concerned about:

Tip pooling is a great way to fairly reward employees, but it isn’t without its challenges.

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