The Lowdown: The new tipping bill

By James McAllister

- Last updated on GMT

How the Employment (Allocation of Tips) Bill will impact hospitality

Related tags Employment (Allocation of Tips) Bill tipping Government Legislation Restaurant Service charge

After years of political back-and-forth, legislation intended to ensure hospitality staff receive all the money left to them in tips by customers is now closer than ever to becoming law.

The issue has finally reached a tipping point you could say…
Finally is the key word here because it’s certainly taken a while. However, in the coming months it’s expected that legislation will pass that will effectively see restaurants and pubs lose the power to deduct money received by staff in tips; a bone of contention that has cast a grey cloud over the industry for more than a decade.

How will it work then?
The Employment (Allocation of Tips) Bill would amend the Employment Rights Act 1996 to require employers to ensure that all tips, gratuities and service charges they receive or exercise control over must be paid to workers in full without deductions and by the end of the following month. It would also enable the Government to create a code of practice intended to ensure fairness and transparency in how the money is allocated among staff, and introduce an enforcement mechanism for employees to make complaints and seek redress.

Who’s behind the bill?
The original private member’s bill was brought forward in 2021 by Conservative MP Dean Russell, who said at the time that it had ‘always felt wrong’ that businesses could take tips given from customers to employees.

Is it common practise for hospitality businesses to take a cut of staff tips then?
It’s hard to say. It was once a common occurrence particularly within the casual dining space where employers would regularly keep a percentage of the service charge and use it to meet the minimum wage – often without customers’ knowledge. In 2015, a string of restaurants including PizzaExpress, Ask Italian and Cafe Rouge were accused in the press of keeping all or part of the service charges added to bills instead of passing them on to waiters, with all three subsequently forced to change their policies to ensure all monies left did go to staff. Other businesses were revealed to have withheld a certain percentage of service charges to cover ‘administrative costs’; while some were reported to have used it to pay for breakages, till shortfalls and customers failing to pay. Last year, the Labour party claimed that unfair tip deductions continue to cost hospitality and leisure workers around £200m a year, suggesting that it must still be rife in some areas of the sector, but the practice does seem to be on the decline.

If all that was common knowledge back in 2015, why has it taken until now for something to be done?
You might well ask. Tipping has been a long-debated issue in Parliament. Following on from those press revelations in 2015, a Government consultation found that restaurant customers were overwhelmingly in favour of the tips they paid going to the people who served them. The Conservatives previously committed to tackling the issue of the unfair distribution of tips in its 2019 manifesto, which eventually led to an announcement in 2021 of plans to overhaul tipping practices and make it illegal for employers to withhold tips and service charge payments from workers. However, that legislation was subsequently shelved.

How long will we have to wait for the tips bill to come into effect?
There’s a high expectation that the Employment (Allocation of Tips) Bill could receive royal assent in the spring. The bill cleared the House of Commons last week and will now proceed to the Lords for further scrutiny before it is passed into law.

Related topics Trends & Reports Casual Dining

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