New employment legislation is expected to make it illegal for employers to withhold tips

22-10-2021


Under new employment legislation announced last month, it will be illegal for employers to withhold tips from workers.

What is the new employment legislation?

The change is expected to effect roughly two million workers from the hospitably, leisure and services sectors. The plan aims to boost workers’ pay, many of whom receive the National Minimum Wage, and enable them to have a right to receive the tips they earn from customers.

Currently, there is no legal obligation for employers to give workers any proportion of tips paid. There is, however, a voluntary code of practice which was introduced in 2009 to improve companies’ transparency surrounding tipping, although research suggests that the code of practice is not well-used or understood.

In 2016, a government consultation [Government consultation on tipping, gratuities, cover and service charges (publishing.service.gov.uk)] was launched in response to concerns about the implementation of the Code of Practice principles, which highlighted that tipping should be:

Five years later, there is little evidence to suggest that these goals have been achieved and various problems persist. In particular there are significant concerns that:

  1. Employers retain the whole service charge without passing on any payment to the employees;
  2. Service payments being subjected to administration fees or used for other purposes;
  3. Employees being required to pay a specific percentage per shift of their (usually 3 – 5.5%) which are put towards non-waiting staff, staff food and drink, training and rewards etc.

Issues were also identified regarding the inclusion of service charges on the bill. A service charge is an optional surcharge, added to the bill as a suggestion of an additional payment towards the service, typically this is a percentage of the overall cost. However, the report shows that in many cases consumers are unclear that the charge is optional or feel obliged to leave the specified amount. Again, in lots of cases none, or only a small proportion of this charge is passed onto workers which some consumers find misleading.

What is expected of the new employment legislation?

What will this mean for employees?

These developments should add clarity to the tipping system and help empower workers in the hospitality and other service industries to ensure they are receiving their tips, as well as give confidence to the customer that any tips make it to the waiting staff.

It will also be important for all businesses in the hospitality sectors to be aware of these changes and take steps to prepare.

For more information on how Gardner Leader can assist you with your employment law matters, please contact our Employment Team on [email protected]


Julie Taylor

Partner
Employment Law

Chloe Ilsley

Assistant
Employment Law

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