The new service charge legislation is due to take effect in October and, although there has been no recent update from the new government, most businesses have already taken steps to ensure that they are prepared. But what should employees do?

The new law dictates that employers must ensure that 100% of service charge is distributed to staff by the end of the following month. Many staff may find that they are better off under the new system, as bad-faith employers will no longer be able to take a cut of tips for themselves. But there are many good-faith operators who also retain tips over the course of the year – not to fill their own coffers, but to ensure that their employees are guaranteed a steady, reliable income. Without this buffer, many people will find themselves newly facing the difficulties of navigating fluctuating pay, showing restraint in bumper months so that there is enough to cover leaner times. In short, they will have to budget.

A recent survey of shift workers by Planday showed that unpredictable income was one of the key factors negatively affecting their mental health, and the lack of ability to guarantee a stabilised income is likely to exacerbate this. Remember, budgeting is not necessarily about being restrictive, it’s about gaining control over your finances so that you can enjoy peace of mind, even when your payslip isn’t as predictable as you’d like. By taking small, consistent steps, you can create a stable financial future that supports your lifestyle AND your mental health.

But how and where do you start? We’ve got some tips which should help you get started.

1. UNDERSTAND YOUR INCOME PATTERNS

BARE MINIMUM:

• Most businesses will be fairly predictable in terms of their busy and quiet months, whether they’re rammed for Christmas or whether it’s their summer outdoor seating which packs people in.
• Remember, you will be working several weeks ahead, as the legislation states that the service charge must be distributed by the end of the following month – ie any tips gathered in November will be paid out in your end-of-December payslip, and December tips will be paid out at the end of January. This means that January will feel like a bumper month, but February might feel pretty bleak.

KEEN:

• If you really get into it, it’s useful to track your income over the course of the year. Yes – it’s spreadsheet time. Record your payslips over at least three to six months, detailing how much you earn each pay period, including tips, overtime, and any bonuses.
• Calculate your average income by adding up your total income over the months you’ve tracked, then dividing by the number of months. This will give you a rough estimate of your average monthly income, which you can use as the foundation of your budget.

2. SEPARATE FIXED AND VARIABLE EXPENSES

• Rent or mortgage payments
• Utilities (electricity, water, gas, internet, phone)
• Insurance (home, car, health)
• Debt repayments (credit card, loans)

• Groceries
• Transport (public transport, petrol)
• Entertainment and eating out
• Clothing
• Social events

3. PRIORITISE ESSENTIAL EXPENSES

BARE MINIMUM:

• When your payslip is lower than usual, it’s crucial to prioritise your essential expenses. These are the non-negotiable costs that need to be covered to maintain your standard of living, such as rent, bills, and food. If your income is low for the month, cut back on non-essential spending like entertainment, dining out, or shopping.

KEEN:

• Create a hierarchy of needs: Rank your expenses from most to least essential. This will give you a clear idea of where to allocate your money first when funds are tight.
• Negotiate bills: Contact your utility providers to see if you can set up a payment plan or lower your monthly costs. Some companies offer discounts for early payments or bundled services.
• Batch-cook and meal plan: Save on groceries by planning meals in advance and cooking in bulk. This helps to reduce food waste and ensures you have affordable, healthy meals ready, even when you’re working long shifts.

HOT TIP:

“I know that I’m shit with money. If I have it I spend it, and I really hate thinking about it. So I just forced myself to spend an afternoon setting myself up with a system that protects me from myself. First I totted up my monthly bills – utilities, rent, council tax, phone, then I opened a separate account in my banking app, which I don’t have a bank card for. I changed all my standing orders to come out of that account, then I set up a direct debit for my bills total plus a buffer of two hundred quid, which comes out of the account where I get paid, into the account where my bills are paid. Anything that’s left is my spending money for groceries, going out, clothes and stuff, and I know I’ll always have enough to cover my bills – and a little extra for emergencies.” – Jon S.

4. FIGURE OUT YOUR ZERO-BASED BUDGET

Don’t worry! A zero-based budget doesn’t mean having zero money. It means that you assign every pound you earn a specific purpose, so your income minus your expenses equals zero. This ensures that no money goes to waste, and you’re being intentional with every pound you spend.

• List your income and expenses: At the beginning of each month, write down your expected income and all of your expenses. Be as specific as possible, including both fixed and variable costs. For the keen beans, this will be easier once you’ve had a few lean months under your belt so that you have an idea of what you’re looking at, but if you’d rather make a finger-in-the-wind estimate then make sure it’s LOW.
• Allocate your income: Assign every pound of your income to a particular expense. If your income is higher than expected, allocate the surplus towards savings, debt repayment, or future expenses.
• Adjust as needed: If your income is lower than expected, reallocate funds from non-essential categories (like entertainment or clothing) to cover your priority expenses.

5. BUILD AN EMERGENCY FUND

BARE MINIMUM:

• Sorry to be boring, but the ONLY way to handle fluctuating income is by building an emergency fund, which acts as a financial buffer allowing you to cover essential expenses during months when your income is lower. It may take a little time to build, and it might feel like torture having money burning a hole in your bank account when there are nice clothes to buy and nice wine to drink, but having a safety net will reduce stress and help you stay afloat during those lean periods (looking at you, February).
• Ideally you’ll be saving enough to cover larger payments for those big future plans, but that’s not always possible. Don’t worry, small is still enough. The easiest way to do this is to open up a basic savings account wherever you already bank – most banking apps allow you to do this hassle free on your phone – and automatically put aside a regular amount at the beginning of each month, whether that’s a set figure or a percentage.
• You can pause a regular payment if you’re worried you won’t have enough on the tricky months, or even add a little more if you can on bumper months, and although you can access it straight away it’s not in your MAIN account so you won’t be so tempted to dip into it for stuff you don’t need.

KEEN:

• Aim for three to six months of expenses: Ideally, your emergency fund should cover three to six months of essential living costs. This may take a while to achieve, but starting with small, regular contributions will help you reach your goals.

HOT TIP:

“Okay I do this thing which feels a bit painful at first, but ends up being actually quite fun when you see it pay off… every time I get that massive urge to make a frivolous purchase, like a new pair of shoes that I’ve seen but I really don’t need, or a fancy coffee where I could just make my own, I go to my phone and transfer that money into my savings account. It’s pretty annoying when you start and you do need a bit of willpower, but when you see that pot start to get bigger and bigger it becomes addictive, like a game. I actually paid for my holiday last year from the money I’d built up – and I couldn’t even remember the shoes I wanted to buy, ha! ” – Aiza H.

6. USE APPS

BARE MINIMUM

We’re all glued to our phones all the time, why not use some of that screen time to help you budget? We know, it’s not exactly fun, but in the digital age budgeting has never been easier. There are several budgeting apps available that can help you track your income, expenses, and savings goals, and these apps can be particularly useful if you have irregular income, as they allow you to monitor your finances in real-time and make adjustments as needed.

You might not even need to download a separate app! Many banks, particularly the newer ones such as Monzo and Starling, have built-in budgeting tools that allow you to set spending targets and categorise your expenses. That also means you can check back to see what your essential spending was last month with just one click rather than having to set time aside. Easy!

KEEN

There are loads of apps that help you save money whilst doing pretty much exactly what you’d be doing anyway (but bear in mind that some of them are subscription, so unless you’re really going to use them it could end up being an additional expense). Here are a few which our community loves:

Soft Launch London gives you access to those new openings, which are typically around 50% off, and having hospitality people through the doors early is useful to them as the crowd will be fun, helpful and understanding over those first few days of chaos.

First Table gives you 50% off the first and/or last tables at a range of great restaurants – Lahpet and Cora Pearl are both on there, for example – meaning that they’re getting footfall and revenue in quiet moments.

Plum is a fantastic app which rounds up every purchase you make and puts the extra in your savings account – for example if you buy a coffee for £3.60, they’ll round it up to £4.00 and put the extra 40p in your savings. You’re likely to be surprised when you check how much you’ve saved!

HOT TIP:

“I’ve used Chase Bank since it launched in the UK. It gives you 1p back for every £1 you spend, and although the return is capped at £15 a month, the fact that you’re making money doing nothing is just great. Over the three years that I’ve been on it, I’ve made £540 by just doing nothing! That’s like three weeks’ rent for me.” – Emma B.

AND FINALLY…

The tips above should help you take the very first steps towards getting a handle on your finances, so that you can figure out exactly what, how and where you need to save or spend – because understanding and controlling your finances (rather than letting them control you) really will empower you and positively affect every aspect of your life.