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Legislation proposal for tipping – what does it mean for employers?

Employment Law, For Employees, For Employers
Katie Elvidge

It’s well known, and research shows, that many employers are keeping all or most of their worker’s tip. In an aim to support workers and to prevent this happening, the government have recently declared a response to their 2016 consultation on ‘tipping, gratuities, cover, and service charges’.

There is no current timetable as to when this legislation will take effect, but the Employment Bill is to be brought forward “when parliamentary time allows.” The expectation for this is late 2022.

Here is all you need to know about the proposal for now and we will update once we know more.

What is the current law on tips and service charges?

Firstly, “Tips already cannot be used to count towards  minimum wage pay and this has been the case since 2009” (The National Minimum Wage- A Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges- October 2009). This is to ensure workers’ rights are upheld in a fair and reasonable way and to avoid exploitation of workers.

Currently, employers do not have any obligation to hand over tips collected from customers to workers, where there is an optional or discretionary service charge on the customer’s bill and paid via card. However, employers cannot force their workers to surrender any cash-in-hand tips they have acquired from customers.

Also – employers should not dictate how cash tips must be shared out.

What are the new proposed changes?

In the recent announcements, the government propose to make it illegal for employers to withhold tips from workers.

However, the legislation will also 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

(GOV.UK press release- 24 September 2021)

What can employers do to implement the changes?

If you haven’t already got one, employers should consider setting up a ‘tronc’ system, where any tips, gratuities and service charge is distributed fairly between employees. There will be an elected ‘troncmaster’ who will decide how the tips should be divided. They will also be responsible for informing HMRC and running payroll, ensuring tips will be excluded from national insurance contributions.

What does it mean if employers break the rules?

If employers make any deductions from wages without prior written consent, they are in breach of contract. Check your contracts is there a deduction from wages clause that covers this?

Any unlawful deduction of wages could result in the employer being taken to an Employment Tribunal to recover these sums.

How can Thrive help?

If you are unsure of whether you are managing Tips at work correctly andf need some guidance,  or are looking for an outsourced HR partner to assist in the management of your workforce, please get in touch today at enquiries@thrivelaw.co.uk

Disclaimer

Please note this blog is for reference purposes only and is only accurate at the date it was published. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action. Please contact us if you have any questions at enquiries@thrivelaw.co.uk

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