Government announces reforms for tipping practices

The government has provided further information on the timeline for the implementation of the reforms to tipping practices. Paul Scully, Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), commented that the government will bring forward the legislation requiring employers to pass all tips to workers “as soon as parliamentary time allows” and expects the new rules to commence no earlier than one year after legislation has passed.

Plans will help around 2 million UK workers retain their tips

Under new plans to overhaul tipping practices set out by the government in September 2021, legislation will require employers to pass on all tips, gratuities, and service charges to workers. The legislation will include:

• a requirement for all employers to pass on tips to workers without any deductions
• a Statutory Code of Practice setting out how tips should be distributed to ensure fairness and transparency
• 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

Employers will be required to distribute tips in a fair and transparent manner, where employers have control or significant influence over tip distribution.

The impact of a cashless society

80% of all UK tipping now happens by card, rather than cash going straight to staff. Currently businesses who receive tips by card can choose whether to pass it on to workers. The new legislation will create consistency for workers being tipped by cash or card, while ensuring that businesses who already pass on tips fairly aren’t penalised.

Tackling unfair tipping practices

The legislation aims to tackle unfair tipping practices across the hospitality, leisure and services sectors, where tipping is commonplace and can make up a large part of employees’ income. Research has shown that many businesses that add a discretionary service charge onto customer’s bills are keeping part or all of these service charges, instead of passing them onto staff. This has a significant impact on workers, many of whom are earning the National Minimum Wage or National Living Wage, who rely on tipping to top up their income. The reforms will also ensure customers know tips are going in full to workers and not businesses.

What will happen if an employer breaks the tipping rules?

Legislation on tipping will be supported by a statutory Code of Practice, developed in partnership with workers and employers to set out the principles of fairness and transparency. If an employer breaks the rules, they can be taken to an Employment Tribunal, where employers can be forced to compensate workers, often in addition to fines.