The Employment (Allocation of Tips) Act will take effect in the UK in October 2024 and will establish important guidelines for salon owners and protections for salon employees regarding tips.
According to research from Phorest, 93% of UK salon owners are still unaware of the legislation or have not yet planned for it.
Part of the legislation makes it a necessity for salons and spas to maintain a written internal tipping policy, which fully explains how tips and service charges are collected, allocated and distributed to workers – and states how the policy meets the terms of the legislation.
The legislation also states that your staff must be informed of any changes to the tipping policy, but this isn’t just a legal necessity—it’s essential for keeping your salon running smoothly and maintaining a positive team culture. So read on for our guide on what should be included in your tipping policy, and how to broach the subject with your team.
If you’re looking for more background on the Act and the options you have for collecting tips and being compliant, you can find all that information on our dedicated website salontippingcompliance.co.uk.
Why a Tipping Policy Matters
First, let’s talk about the legal side. The Employment (Allocation of Tips) Act means that every salon needs to have a tipping policy. If you don’t, your employees can take complaints against you to an employment tribunal.
While you don’t need to get consensus from your employees on your policy (the ultimate decision on tipping policy is with the salon owner), it is good leadership best practice to ensure your employees are consulted in the decision making process. A good tipping policy is about fairness and transparency. Your team works hard, and it’s crucial that they feel valued and treated equitably.
Involving your staff in the creation of the policy is not just about ticking a box. It’s about ensuring that everyone understands and supports the way tips are handled. This involvement builds trust and keeps everyone on the same page, reducing potential conflicts.
Key Points to Discuss with Your Team
1. How Tips Are Collected and Distributed
There are several ways you may decide to collect and distribute card tips in order to ensure compliance with the act and fairness for you and your team. Some options have different tax and fee implications for you and your team than others, so it’s important to be informed.
We’ve made this as easy as possible. As a pre-read before your consultation with your team, download and share with them a copy of our simple guide to tipping laws and tax compliance for salons and their staff. You can then discuss the pros and cons of each option, and reach a consensus with your staff on the right path to choose.
2. Who Gets a Share of Tips
One size doesn’t fit all, so consider how tips will be shared among different roles, including non-service providers like front desk staff or trainees. The law gives you the discretion to decide, but fairness is key. Discuss this openly with your team to ensure the policy feels just and reflects everyone’s contributions.
3. Handling Disputed Transactions / Chargebacks
Chargebacks can be tricky. If a client disputes a transaction and the tip has already been distributed to your staff, your business might end up covering the cost of the tip that was charged back, unless otherwise stipulated in your tipping policy.
To protect your salon from the financial burden, you might want to discuss with your staff that in the event of a chargeback, the tip amount can be recovered from their future wages. This needs to be communicated clearly to your team so there are no surprises down the line.
4. Internal Communication
Once the policy is set, make sure it’s communicated effectively internally. Update your website, train your staff on how to explain the policy to clients, and ensure that any updates or changes are shared promptly.
5. External Communication
To avoid any doubt with your clients, it’s a good idea to display a simple tipping notice close to your register. An example tipping notice might look something like this:
Example Tipping Notice
Tipping Policy for [Salon Name]:
We do not add a service charge to your bill.
100% of all tips given via card payments are paid directly to the service provider(s) you booked with, unless you choose to deduct the transaction fee from your tip.
In the event of a chargeback, any tips already paid to staff may be recovered from future wages. This policy ensures that our team is fairly compensated while protecting the business.
Ready to Run Your Tipping Policy Workshop?
As part of our FREE Salon Business Bites Course on Tipping for UK Salons, we have created a downloadable resource you can use to run your tipping workshop with your team. To access the course and the downloadable content, sign up here.
Get Started with PhorestTips
While you should go through the process of weighing up all the options with your team, we believe we have the best solution to keep everyone happy.
Phorest makes things easier by sending each employee their tips straight to their bank account, so they are never received by your business and so don’t incur any additional fees, taxes or admin for you. Stylists and therapists get their tips into their account instantly, at no cost to the business, and there’s no QR code chaos for your customers.
A win-win-win for your clients, your team and you! Learn more about PhorestTips.
