NIM02921 – Tips, gratuities and service charges: Gratuity disregard conditions: Condition 1

Paragraph 5(2) of Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001

If

• an employer does not pay gratuities or payments in respect of gratuities either directly or indirectly to their employees and
• the payments do not comprise or represent sums previously paid to the employer

the payments can be disregarded from earnings. This is referred to throughout this manual as condition 1 of the gratuity disregard.

So, where an employee receives payments of gratuities direct from a customer and the employer is not involved in making the payments, there will be no NICs liability.