Can employers withhold tips from workers?
March 30, 2022
Back in 2015, businesses in the hospitality industry in particular restaurants were accused of keeping tips paid by customers via their debit /credit card to workers or charging customers up to 10 per cent on the final bill for service charge payments but not passing those payments on to the worker as being an administration cost.
Although such allegations were denied, but with Government findings that 80 per cent of all UK tipping now happened by card and businesses could either decide to keep it or pass it on to workers (1) the Government decided that they would introduce legislation to prevent such exploitation.
The Employment (Allocation of Tips) Bill
The Employment (Allocation of Tips) Bill has been brought before Parliament that will:
- Place a requirement for all Employers to pass all tips, gratuities, and service charges to workers without any deductions other that required under tax law
- Provide a Statutory Code of Practice to ensure fairness and transparency on how tips should be distributed including via tronc systems
- Allow workers the right to request information relating to the Employer’s tipping record thus Employers will need to have in place a written workplace policy on tips, gratuities, and service charges
- Allow employee to take matter to Employment Tribunal for compensation if the rules are breached. The Employer could also be subject to fines.
The Bill is in its second reading before Parliament and subject to any further amendments will proceed to receive Royal Assent with a likelihood of about a year or so before it is actual law to give Employer’s time to adjust to the requirements of the legislation.
The Government are keen to highlight that tipping is a discretionary voluntary payment made by a consumer to a worker and that it must be “clear and transparent to consumers and workers in terms of how the payments are treated” (2).
In light of the pending legislation, it is prudent for Employers likely to be affected by the new provisions to start reviewing their policies and procedures in readiness for the changes to be introduced.
Please note that this article is for general information purposes only and should not be relied upon as being authoritative on the matter and is current to 10 March 2022 however further guidance on the matter can be provided by contacting our HR/legal advice-line on 01455 852028.
Source 1: https://www.gov.uk/tips-at-work
Advice from Jatinder Tara, Quest, provider of Chamber Four Services