The government plans to ban employers from withholding tips from workers, something which many of us may have believed was already the case. This new rule is set to come into force within the next year and if an employer breaks these rules, they may be taken to an employment tribunal and forced to pay compensation.

Currently, businesses that receive tips by card have the choice of whether to keep it or pass it on to workers. Cash tips, on the other hand, are legally the property of staff. However, since the pandemic fewer tips are paid in cash and therefore there has been a need to protect what would have otherwise been considered the staff’s possessions. Unless a worker’s contract of employment says otherwise, there is no legal requirement for businesses to allocate a specific proportion of its service charge or non-cash tip income to staff.

This impending change follows a series of high-profile stories about companies deducting money from card payments intended for waiting and kitchen staff. Research has shown that many businesses add a discretionary service charge to customer’s bills and regularly keep part or all of that money instead of passing it to staff. The government are hopeful that this will provide a boost to workers in pubs, cafes and restaurants whilst reassuring customers their money is going where they intended it to.

The new law will require all employers to pass on to their staff:

• Tips
• Service charges
• Gratuities, in full without any deductions.

This updated legislation will also introduce a statutory code of practice, which will set out exactly how tips should be distributed fairly. This should hopefully assist many small businesses within hospitality who are unsure of their obligations. From the specific wording of the proposed changes, this would suggest that it will affect not only employees but staff members who may be considered ‘workers’ and therefore a wider range of individuals.

These workers will also get the right to request information on their boss’s tipping record, which may then be used as evidence when bringing a claim within an employment tribunal.

The downside?

For many hospitality businesses, customers tipping with cards incurs bank charges or administration fees and this may now encourage businesses to employ external partners to ensure tips are fairly distributed among staff, which could add a further financial burden to an already struggling industry.

If you are unsure of your obligations towards your staff or worried about impending changes to the law feel free to get in touch and speak to one of our expert HR advisors today.

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