The government has promised to legislate to make it illegal for employers to withhold tips from workers.
Ministers claim the much-anticipated move, to be announced today, will help about two million people who work at one of the 190,000 businesses in hospitality, leisure and services sectors, where tipping makes up a significant part of workers’ incomes.
However, there is still no fixed timetable for the proposals, part of the wider much delayed Employment Bill, with the government saying it will introduce legislation “when parliamentary time allows”.
Many hospitality workers – a high proportion of whom are earning the national minimum wage or national living wage – rely on tipping to top up their income. But, said the Department of Business Energy and Industrial Strategy (Beis), research had shown that many businesses that added a discretionary service charge onto customer’s bills were keeping part or all of these service charges, instead of passing them onto staff.
The legislation will be aimed at ensuring customers know tips are going in full to workers and not to the businesses, many of which are large chains backed by financial institutions.
Beis ministers said the rapid move towards a cashless society had “accelerated dodgy tipping practices”, because card payments had made it easier for businesses to keep the funds.
About 80% of all UK tipping now happened by card, rather than cash going straight into the pockets of staff, said Beis. Businesses who receive tips by card currently have the choice of whether to keep it or pass it on to workers.
Today’s plans will create consistency for those being tipped by cash or card, while ensuring that businesses who already pass on tips fairly aren’t penalised.
Labour markets minister Paul Scully said the move was intended to counter companies profiting from their workers’ tips: “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.”
The legislation to be introduced will include:
- A requirement for all employers to pass on tips to workers without any deductions.
- A statutory code of practice will set out how tips should be distributed to ensure fairness and transparency.
- New rights for workers to make a request for information relating to an employer’s tipping record, enabling them to bring forward a credible claim to an employment tribunal.
- Under the changes, if an employer breaks the rules they can be taken to an employment tribunal, where employees can be forced to compensate workers, often in addition to fines.
Tipping legislation will form part of a package of measures that will provide further protections around workers’ rights.
A tips private member’s bill was submitted in June by Conservative MP for Watford Dean Russell, who said in July the proposal was not anti-business. He has now agreed to withdraw his bill in favour of the new proposals.
He said: “I want to be clear I am not attempting to demonise businesses with the tips bill. The vast majority I speak to ensure staff are fairly treated. I am also aware that for some businesses they may need to cover the minimal cost of admin fees for credit card payments. This bill simply ensures fairness for hard working staff and provides protections again less scrupulous employers.”
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The government recently announced its first ever Hospitality Strategy, aimed at helping the sector increase its resilience, making hospitality a career option of choice, boosting creativity, and developing a greener sector. The proposals will be fed into a wider government Employment Bill, which the government committed to in the Conservative’s 2019 manifesto and will include other new laws to enhance workers rights.
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