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Reaching tipping point on gratuities
25 Sep 2019

Restaurateurs and other hospitality sector businesses should not bank on Brexit delaying the Government’s plans for legislation designed to deal with tipping protocols, an employment expert at FBC Manby Bowdler has said.

In December last year the Government revealed that it would introduce legislation as soon as possible to stop employers making deductions from tips and gratuities, including any so-called ‘administration’ charges that are often levied where tips are given through card payments.  

Although there’s no confirmed date for a new law to come into force, businesses must be prepared for these new changes and how they account for tips and gratuities to their staff, said Tracy Worthington, a Partner in our employment team: 

The plans formed part of the Government’s Good Work Plan proposals, which drew on recommendations from Matthew Taylor, who was commissioned to conduct an independent review of modern working practices.    

The Government was clear in its plans to force employers to hand over all tips to hospitality sector staff and, while this has not translated into legislation yet, employers should not ignore the best practice involved in preparing for such changes. 

Customers are likely to check with staff what will happen to any tip they may leave. It will not reflect kindly on a business if customers find the employer is keeping the tips. This makes it important for employers to be ahead of the curve and not wait for legislation to force them into handing tips over.

Whether tips are paid through a set percentage service charge or added at the discretion of the customer in cash or card payments, currently there is no law to control how tipping in the workplace is managed. There is a voluntary code of practice, which encourages employers to be transparent, but it does not place employers under any obligation as to how the tips are managed and distributed.  

The only restriction on employers is that tips cannot count towards the national minimum wage (NMW). The NMW Regulations apply to any eligible worker, whether they are paid by the hour or on some other basis, and calculations must be made to check if the equivalent hourly rate is at the right amount and any gratuities paid at work must be on top of the NMW.

Some restaurants may have what is known as a tronc scheme. This is effectively a self-administered scheme for staff, with a tronc master appointed to distribute tips between staff. The employer is not able to influence the operation of the scheme or how the tips are shared.   

Unfortunately there are still too many stories of tips being used to cover the company’s card transaction charges, to recompense for any till shortages or even breakages. It’s inevitable that this legislation will be controversial in many quarters but ignoring the problem is not the solution.

Meet Tracy Worthington