Tips in hospitality

The government plans to introduce legislation that will mean it is illegal for hospitality firms to withhold tips from workers. Research has shown that many workers in this industry rely on the tips of their customers to top up their income as many are on minimum wage payment.

When the law is passed it will mean that employers could be taken to an employment tribunal and required to compensate workers and face fines if found guilty of a breach in the payment of tips.

This ruling would apply to both cash left tips and those made on card – a more recent development in technology to allow a customer to leave a tip. This would mean businesses offering this facility would have to ensure the tip was passed onto the worker after the payment was processed, currently it is the employers discretion whether to do this or not.

Research also shows that many businesses that add a discretionary service charge onto customer’s bills are keeping part or all of these service charges, instead of passing them onto staff.

The legislation will include:

  • a requirement for all employers to pass on tips to workers without any deductions
  • a Statutory Code of Practice setting 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

It is also worth remembering that tips cannot be used to count towards minimum wage pay and this has been the case since 2009, when a previous voluntary Code of Practice was published in this area. This latest announcement has not given a date at which it will become effective, but it is expected to be within the next year and businesses should start to review their current practices to ensure they are able to meet the new legislation.