Many hospitality workers earn the national minimum wage or national living wage and rely on tipping to top up their income. However, businesses can add a discretionary service charge onto customers’ bills and research has shown that many businesses keep part or all of these charges instead of passing them onto staff.
As we have moved towards a cashless society and there has been an increase in card payments, it has become easier for businesses to keep such funds. According to the Government, 80% of all UK tipping happens by card and businesses have the choice of whether to keep it or pass it onto workers.
This could soon change. In 2016, the Government launched a Consultation on Tipping, Gratuities, Cover and Service Charges. On 24 September 2021, the Government unveiled its plans to make it illegal for employers to withhold tips from workers and confirmed it will legislate to prevent employers making any deductions from tips received by their staff, other than those required by tax law.
This move is estimated to help around 2 million people working across the hospitality, leisure and services sectors where tipping is common practice and can form a large part of their income. Customers will also know that tips are going in full to workers and not businesses.
The legislation will include the following:
The legislation will be included in the forthcoming Employment Bill and the Government expects the rules to commence no earlier than one year after the Bill has passed.