In 2016, the Department for Business, Energy and Industrial Strategy (BEIS) launched a consultation on tips and gratuities in the hospitality industry, based on three objectives:

1. that it should be clear to customers that tips are voluntary
2. that tips should be received by the workers and that it should be clear; and
3. transparent to both customers and workers how those payments are treated.

Now that the consultation is concluded, the responses show that under the current guidance and rules, the above objectives are not being achieved.  The government now plans to overhaul tipping practices and legislate to ensure that workers get any tips that are left for them, in full, so that they get what they are entitled to and that customers have the necessary reassurance about this.

Many workers in the hospitality industry work for minimum wage and rely on tips to top up their income.  However, research has shown that many business owners have not been distributing service charges fairly and transparently and have been keeping all or part of these service charges for themselves. In an increasingly cashless society, it is easier for business owners to divert gratuities away from staff, rather than staff being able to pick up cash from the table and keep what the customer has left for them.

The government said that they will make it illegal to withhold tips from workers, as part of an upcoming Employment Bill. This would require employers to pass tips on to workers, in full, without making any deductions. Employers will also be required to have a written policy on tips and distribute tips fairly, in a way that is transparent, and they must also keep records of how tips have been dealt with.

There will also be provisions to allow workers to request information relating to an employer’s tipping records and, where employers fail to comply with these measures, they can be fined and employees can be compensated via the Employment Tribunal.

The consultation showed that most employers are in favour of the proposed reforms, however, some feel that they would face increased costs from complying with the reforms.

The Employment Bill will progress as soon as parliamentary time allows.  We will be discussing the latest on the Employment Bill in our employment law webinar, coming up on Wednesday 11 November 2021. To reserve your free place to attend, complete the Eventbrite booking form.

The government’s response to the consultation on tipping, can be accessed via their website.

If you have any queries about how the proposed changes will impact on how your organisation deals with tips, please contact our employment team.