2 million workers could benefit from new tipping legislation

As many as 190,000 businesses across the hospitality, leisure and services sectors may have to change tipping practices to comply with the law.

Tipping Point

There’s always been a bit of a wrangle over tipping. When you hand over a tip in a restaurant, bar or any other establishment, you are rewarding your waiter and their colleagues for the service they have provided.

I remember, many years ago, when I worked in hospitality the tips were pooled and shared equally between front of house and kitchen staff. It seemed only fair and the practice was more or less accepted industry wide.

However, times have changed. Most of us now pay by card and the ‘discretionary service charge’ is either added to the bill or there is an option to tip when the PDQ machine is presented. That’s the only way I can now tip as I can’t remember the last time I had any cash in my pocket!

80% of all tipping is now paid by card

From the perspective of the staff, tipping is a crucial way of boosting their salary because many are only paid the minimum wage or marginally above. Back along, when cash was king, staff could see the tip jar filling up and would know that they were at least going to receive something extra.

But now the service charge goes straight into the employer’s bank account and staff have to rely on their goodwill to distribute it - and when/if they do, many employers retain a portion for themselves claiming a ridiculously high ‘administration charge’.

The government have called the practice shameful. Since 2009 employers have been prevented from using tips to top up pay to the minimum wage, but abuse of the tipping system still goes on, despite a voluntary Code of Practice introduced at that time.

But not for much longer…

The government have recently announced they have concluded their consultation into this shady area of staff gratuities. Their intention is to legislate to:

  • Require employers in all sectors to not make any deductions from tips received by their staff, including admin charges, other than those required by tax law.

  • Require employers to distribute tips in a way that is fair and transparent, with a written policy on tips, and a record of how tips have been dealt with. Employers will be able to distribute tips via a tronc, and a tip must be dealt with no later than the end of the month following the month in which it was paid by the customer.

  • Make provisions to allow workers to make a request for information relating to an employer’s tipping record. Employers will have flexibility how to design and communicate a tipping record, but should respond within four weeks.

  • Require employers to have regard to a statutory Code of Practice on Tipping.

  • Where employers fail to comply with these measures, this will be enabled through the Employment Tribunal.

These measures are expected to be introduced in due course in the new Employment Bill (I can’t say any more than that regarding implementation).

No doubt some employers will complain that these measures will introduce more red tape and incur additional costs by creating yet another policy and keeping more records. I have sympathy with that position, but the abuse of tips and gratuities has been going on far too long and clearly the current voluntary Code of Practice has not had the teeth to tackle this problem.

I have no doubt employment lawyers will be rubbing their hands with glee. More advice and undoubtedly more tribunal claims are on the horizon.

I will of course update when I have more information as to when this legislation will be passed.

If you work in the hospitality industry, either as an employer or worker, why not let me know in the comments section how this will affect you?

In the meantime I’m off to draft a Tipping Policy!

A Couple of Q&As - more in my main newsletter later in the week.

Q. My employer pays me a lower rate night shift allowance because I’m a manager. Could this be discrimination?

A. That depends. Simply paying you a lower rate is not in itself discriminatory. To be discriminatory the reason you are paid a lower rate has to be primarily due to a ‘protected characteristic’, such as race, disability, age sex, etc. If you can show other managers are paid higher night shift rates because they don’t share the characteristic then you may have a case for discrimination.

Q. Can you be dismissed for looking for another job and they find out?

A. No! (but see the end) Everybody is entitled to look for alternative work, whether it be for a different type of employment or even your employer’s rival. You employer can take measures to stop you working for a competitor for a limited period by having you sign post termination restriction clause and they can also prevent you working for a competitor or taking a second job if it interferes with your current contract with them. These are contractual provisions which many employers incorporate to protect their businesses, but at the end of the day we’re all free to look for work elsewhere. Note: If you have less than two years service and your employer finds out you’re looking for work, they could dismiss you on a weeks’ notice (or whatever your contract says) and you will have no recourse to an employment tribunal.