Industry reacts to new tipping bill with vigilance

15-Oct-2019 - Last updated on 27-Apr-2021 at 12:35 GMT

The government’s pledge to deliver new legislation requiring employers to pass on tips paid to workers in full has been met with concern by the hospitality sector.

During yesterday’s (14 October) Queen’s Speech, the government announced it would introduce the Employment (Allocation of Tips) Bill to support workers in the industry.

The new law, which comes more than three years after a consultation into tips, service charges and troncs was led by then business secretary Sajid Javid, will require employers distributing tips among workers to do so “on a fair and transparent basis”.

However, with the finer details of the bill yet to be disclosed, the news has been met with certain degree of vigilance by members of the industry.

“Any new measures need to have full input from the hospitality sector, the businesses who will be affected,” says UKHospitality chief executive Kate Nicholls, who adds that legislation on tipping threatens to add another unwanted burden on businesses.

“We already have a clear, transparent and fair voluntary Code of Practice regarding the collection and sharing of tips… and customers can be confident that the money they tip is going to the correct place.

“Deductions are sometimes made to service charges as hospitality businesses are charged by banks in order to process payments. If the full amount is to be passed on, then hospitality businesses are going to be forced to foot the bill.

"If there is a new legal obligation to pass on the full amount of a service charge, then there needs to be action to ensure that hospitality, a sector that provides over 3.2 million jobs around the UK, is not stuck with yet another tax. That may mean measures to cap or remove charges to hospitality businesses altogether.”

At the moment, companies are able to follow a voluntary tipping system that means they have no legal obligation to pass service charge over to staff.

Now, the new bill will ensure the cash is handed over to staff by law, meaning employers will have to pass on all tips, gratuities and service charges to workers without deductions.

Peter Davies, managing director of WMT Troncmaster Services, echoes Nicholls’ concerns.

“Whilst I think we’d all agree with the general thrust of this new legislation, we need to know the finer details before we can give a final verdict on it,” he tells BigHospitality.

“If the government gets its wrong and imposes an additional cost on businesses that they have no control over, it could lead to significant and unforeseen consequences.

“Operators could turn around and say they can’t afford the extra rates, and subsequently take drastic steps to avoid it such as not allowing customers to leave gratuity electronically.

“And in an increasingly cashless society, this runs the risk of further depriving those the government is ultimately trying to help.”