UK Government creates new bill to ensure all tips go to staff

In the UK, tipping in the hospitality industry has always been a contentious issue - unlike in some European countries where tipping is customary, we Brits can often be a little awkward when it comes to leaving gratuities, especially when tipping is more commonly associated with special occasions or while on holiday abroad. In contrast, tipping is deeply ingrained in the culture of the United States where it forms a significant part of a service worker's income. With the cost of the living crisis currently hitting the UK, tips are now quickly becoming more and more important to workers, especially when minimum wage jobs, such as entry-level hospitality roles, struggle to keep up with the rate of inflation. 

In a move backed by UKHospitality, the government has introduced a new law that will mean all tips should now be going to hospitality workers and not the businesses they work for. This new law hopes to make tip sharing easier, however, many workers would suggest that rather than changing tipping laws, the UK should work to provide more significant aid to the hospitality industry and its workers. You can read the government's official legislature on the new tipping bill here.

The new tipping bill

The UK government has introduced a new tipping law to address the concerns surrounding the distribution of tips in the hospitality industry. The legislation, outlined in the UK government's official website, makes it illegal for employers to withhold tips from workers. This long-awaited change aims to ensure that tips go directly to the staff who provide the service, and although there were previous laws trying to enforce this, those laws only affected cash tips. This new law means that all card gratuities should also lawfully be given to staff. 

The change has been welcomed by the hospitality industry. It is widely considered fair that hospitality workers receive these gratuities since many customers assume their tips will benefit the staff, not the business itself. Moreover, in the current economic crisis, where many workers earn minimum wage, tips can provide a significant boost to their income.

Kate Nicholls, Chief Executive of UKHospitality, expressed support for the new legislation, stating, "We're pleased to support this new piece of legislation as it comes into law and look forward to working with government and other stakeholders on a code of practice that ensures a fair distribution of gratuities amongst all who contribute to providing great hospitality."

What does the legislation say?

The legislation introduces several key points:

• Employers are required to pass on tips to workers without making any deductions.
• A statutory code of practice will be implemented to guide the fair and transparent distribution of tips.
• Employers must establish a written policy on tips and maintain records detailing how they manage them.
• Workers have the right to request information about their employer's tipping record, enabling them to bring credible claims to an Employment Tribunal.
• These regulations apply to various hospitality businesses, including restaurants, bars, and cafes. 
• Tips must be allocated fairly among all workers, including those on zero-hour contracts.

What does this mean for Businesses?

Under the new legislation, employers who fail to comply with the rules can face legal action in an Employment Tribunal. The consequences may include compensation payments and fines, and therefore it is crucial for businesses and owners to understand and adhere to these new laws, or face charges. 

This change may also impact the cash flow of certain hospitality establishments that previously relied on tips to supplement their revenue. So, in other words, businesses who previously took a portion of tips and placed them back into the business will now need to rejig their business plan to accommodate these losses.  

Businesses will also need to plan how they display tipping practices and effectively communicate these changes to both staff and customers. Transparent communication is key to maintaining a positive employer-employee relationship during this transition, and both staff and customers will appreciate the effort taken to make sure your guidelines around tipping are clear and easily understood. 

How does this affect tipping culture?

The introduction of this new law raises questions again about the tipping culture here in the UK. While tipping is beneficial for hospitality staff, adopting the American system, where employees heavily depend on tips for income, would not be a good move. Relying on tips in place of a salary is risky as the number of tips given by customers cannot be realistically predicted. The American system also places more pressure on workers to source tips and wrongly takes the pressure off of a business's responsibility to fairly pay their employees.  

Instead of incentivizing tips, a better route to helping hospitality workers would be in establishing a fair wage system that matches the current inflation rate. However, in order to achieve this the hospitality industry needs more assistance from the UK government to ensure staff members receive adequate compensation without relying solely on the generosity of customers. By addressing the issue of fair wages, the industry can provide stability and security for its workers in the long run. 

Helping hospitality

The industry has been calling on the Government once again to provide assistance to the industry - an industry which, according to new reports, contributes 93 billion pounds to the UK economy yearly. UKHospitality C.O. Kate Nicholls said: “These figures show just how much of an economic powerhouse hospitality is.” She called on the “Government to work even more closely with us, to seize the opportunities available and unleash the incredible potential of hospitality.” 

However, on a more positive note, the UK government's new tipping bill is a significant step towards ensuring fairness and transparency in the distribution of tips within the hospitality industry. By legally mandating that tips go directly to staff, workers can benefit from this additional income, especially during challenging economic times. However, ultimately, establishing a fair wage system remains a priority to alleviate the dependence on tips and provide stable livelihoods for hospitality staff.

If you work in the hospitality industry and are looking for your next chapter, or if you are a business owner looking to find skilled self-employed workers, reach out to the Brigad team today.