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Calculating your National Minimum Wage pay rate

Any service charges, tips, gratuities and cover charges (tips etc) you are paid must be on top of your National Minimum Wage (NMW) rate. This applies no matter where you work.

It also doesn't matter how your employer pays you the tips, including:

• cash at the end of a shift
• monthly in your pay packet
• weekly divided between all of the staff

You should deduct the total of any tips etc from your gross pay before calculating if your pay is at least the NMW rate. Your gross pay is your pay before any deductions like tax, National Insurance or student loan.

• Calculating the National Minimum Wage: the basics

Your employer's policy on tips etc at work

The Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges (the Code) sets out recommended approaches for businesses when handling service charges, tips and gratuities.

Businesses should make sure that workers understand the company policy on tips etc, including:

• how tips etc are distributed between the company and workers, including between the workers themselves (for example, if a 'tronc' is used and who the 'troncmaster' is)
  
• the amount of any deductions from tips etc and why the deductions are made
  
• access to a written statement setting out the business's policies on tips etc, which can be provided to consumers
  
• any deductions from tips etc to cover breakages, till shortages or customer walk-outs
  
• the company's grievance procedure

There are also recommendations around the information your employer should consider giving to customers.

Written statement containing the company's policy

If your employer meets the Code, they should give you the company policy on tips etc in a written statement.

This statement should include:

• how tips are distributed (eg if a 'tronc' is used)
• if cash and card tips are treated differently
• the name of the 'troncmaster' (if appropriate)
• how much might be deducted for administration and what this covers
• any other deductions
• what happens during leave (eg holidays, sick leave, parental leave etc)

If your employer pays you tips without National Insurance deductions, they should tell you. This may impact your entitlement to certain social security benefits.

• Tax and National Insurance on tips and bonuses (money, tax and benefits section)

• Written statement of employment particulars

Changes to your company's policy on tips etc

The Code advises your employer to seek to reach agreement on changes to their policy on tips etc with workers.

Troncs and troncmasters

A tronc is an arrangement for pooling and distributing service charges, tips and gratuities to workers. The 'troncmaster' is the person who distributes the money from the tronc.

• Tax and National Insurance on tips and bonuses (money, tax and benefits section)

Where to get help

Businesses do not have to follow the Code, it only shows good practice when dealing with tips.

If you have a question about tips and the NMW, you can contact the Pay and Work Rights Helpline. You can also contact the helpline to make a complaint if your employer isn't respecting your rights to the NMW.

You can ring the helpline on 0800 917 2368, or use the online enquiry or complaint form.

• Pay and Work Rights Helpline

• Pay and Work Rights complaint form Opens new window

• Pay and Work Rights general enquiry form Opens new window