Tips are an important aspect of income for workers in the travel, leisure and hospitality industries but for a long time, there has been criticism about how this money is paid to staff.
Now, under new Government plans, all tips will have to be given to staff as employers will be banned from removing tips and service charge payments from workers’ wages.
Previous research into tipping has revealed that some businesses that add a discretionary service charge onto customers’ bills are keeping part or all of the money received, instead of handing it back to staff.
Some tips paid via credit card have also been withheld from staff. This has led to this becoming a growing issue as around 80 per cent of all UK tipping now happens by card.
It is thought that the new law will help around two million UK workers to retain their tips but it will also require many employers to review their existing payroll processes in regards to these gratuities.
Minister of Small Business, Consumers & Labour Markets, Paul Scully, said: “Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service.
“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.”
Under the legislation, all employers must pass on tips to workers without any deductions, regardless of previous reasons for withholding tips.
A Statutory Code of Practice will also be created setting out how tips should be distributed to ensure fairness and transparency among staff.
Workers will also be given the right to request information relating to an employer’s tipping record. This will allow employees to challenge their employer at an Employment Tribunal, where employers may be forced to compensate workers, in addition to potential fines.
If your business involves tipping or a service charge and you are unsure how this change may affect your payroll processes, please speak to our team.