The overhaul of tipping practices will mean that all tips will be given directly to hospitality workers without any deductions and that it will be illegal for employers to withhold tips and service charge payments from workers.
A statutory code of practice will be developed after further consultation with businesses, workers and other stakeholders will set out how tips should be distributed to ensure fairness and transparency. There will also be new rights for workers to make a request for information relating to an employer’s tipping record, enabling them to bring forward a credible claim to an employment tribunal.
Around two million people working in the hospitality, leisure and services sectors are expected to benefit from the move.
According to Government research, many businesses that add a discretionary service charge onto customer’s bills keep part or all of these service charges instead of passing them onto staff. If an employer breaks the rules, they can be taken to an employment tribunal, where employees can be forced to compensate workers, often in addition to fines.
“Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service," says Minister for Small Business, Consumers and Labour Markets Paul Scully. "Our plans will make this illegal and ensure tips will go to those who worked for it. This will provide a boost to workers in pubs, cafes and restaurants across the country, while reassuring customers their money is going to those who deserve it.”
UKHospitality chief executive Kate Nicholls has welcomed the move. “UKHospitality supports the right of employees to receive the deserved tips that they work incredibly hard for,” she says.
“The hospitality sector as it begins to rebuild after 18 months of restrictions and enforced enclosure is already creating new jobs and driving the jobs recovery. Ensuring employees receive the tips they earn will further strengthen the sector’s ability to create jobs and support the wider economic recovery.”
“For hospitality businesses, though, customers tipping with a card incurs bank charges for the business, and many also employ external partners to ensure tips are fairly distributed among staff.
“With restaurants, pubs and other venues struggling to get back on their feet, facing mounting costs and accrued debts, we urge the government to continue to work closely with the sector as it introduces this legislation to ensure this works for businesses and employees.”