Did you know that there is new legislation coming into effect in July 2024 regarding the collection and distribution of tips that all Salon and Spa Employees need to be aware of?

Mark Ronayne, Head of Payments at Phorest breakdowns what’s involved in the new legislation, and the potential tax implications to Salon Owners.

Mark, what makes you such an expert in this area?
My role involves the support of researching and developing products and features that solve real customer problems and pain points. My day-to-day role focuses on Payments, Tax and Accountancy landscape. I even used to work for the Tax office prior to joining Phorest! So, I’ve got a real understanding of how the hair industry works, and I’m focused on growing Salon Owners’ businesses, whilst keeping ahead of industry trends and regulations… Like this new tipping legislation.

What’s this new legislation all about?
The Act is focused on three changes for your hair team. Firstly, 100% of tips or service charges left by Customers are paid directly to Employees. The Employer cannot take any deductions for admin or transaction charges for example. Secondly, the allocation is dealt with fairly and transparently. Finally, you will need to ensure that all taxes (PAYE and National Insurance) are withheld and paid on all tips.

It’s important to note that this only applies to tips that are ‘Employer-received’. Typically, the tips are paid by card but if you do have a cash tip jar or do cashback, then the act also covers that, too.

How do I know who to share the tips out to?
The Government is working on a ‘Code of Practice’, which will provide practical guidance around fair allocation. This is still a work in progress. Typically, in a salon, the fair distribution of tips means tips left by a Client would go directly to the Service Provider(s) who carried out the service on that Client. Under The Act, the Salon Owner must have a transparent and written policy made available to Employees on how the salon collects and allocates tips, and Employees must be notified of any changes. You may also need a publicly displayed tipping policy for Clients.

 

 

 

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Is there going to be an easy system to implement all this? 
Our new PhorestTips system provides a smooth process for Salon Owners, and we really believe we’ve thought of everything to help you and your team out. There are of course other alternatives such as; Handling tipping distribution via payroll but this incurs additional costs to you with NI payments. You could also sett up an independent tronc but that involves lots of admin, and staff have to wait up to 2 months for tips. Or you could only accept cash tips but we know that many Customers no longer carry cash. PhorestTips is the easiest option! 

Tell us all about PhorestTips
As the new PhorestTips launched in June, you are going to be 100% compliant with the new tipping laws, your team can receive card and cash tips instantly, and there’s no additional taxes or fees to you as a Salon Owner.

PhorestTips will allow your business and team to accept tips on your PhorestPay Card Terminal without the need to implement a complicated and costly tronc system or worry about National Insurance contributions. Tips are instead sent automatically directly to your Employees’ accounts, without ever being received by your business. By doing so, these tips are not ‘Employer-received’, thus they are exempt from the provisions of this new legislation.

What is the cost for PhorestTips?
If you already have a PhorestPay Card Terminal, then the upgrade to the new PhorestTips is free of charge, once activated. Otherwise, Salon Owners can speak to us about setting up their PhorestPay Card Terminal. 

How can we sign up?
Learn more about the new legislation and tax compliant PhorestTips system to benefit both Salon and Clients at www.salontippingcompliance.co.uk, and www.phorest.com.