The Government has announecd that it is to legislate in order to make it compulsory for businesses in the hospitality, services, and leisure sectors to pass on tips to staff. As we highlighted in a previous article, this is a move that was widely anticipated, as it is a proposal that the Government first announced way back in 2016. It then committed to legislation in 2018 after a consultation (and it was included in the 2019 Queens Speech), but the legislation was then delayed by Brexit and the Covid-19 pandemic.
Passing On Tips To Staff
The Government has confirmed that legislation will be included in the forthcoming Employment Bill to make it compulsory for businesses in the hospitality, services, and leisure sectors to pass on tips to staff. Nevertheless, as we have previously reported, there is not yet any firm timetable for the Employment Bill, which is unlikely to be introduced before 2022 at the earliest.
Cash paid directly to individual employees already belongs to that employee. However, service charges added to a bill or non-cash tips belong to the business, and there is currently no legal requirement for business to pass on all or part of those tips to staff. A code of best practice was introduced back in 2009, but that does not compel businesses to pass on tips to staff and there is no legal obligation for businesses to follow that code.
The issue has come to a head as a result of the Covid-19 pandemic, because of the decline in the use of cash as a result of social distancing. This has meant that the overwhelming majority of tips, around 80%, are paid via means other than cash, such as by card and by smart phone apps.
Indeed, one person told the i newspaper back in July 2021, that: "We still have service charge[s], which [are] taxed and added to our salaries, but cash tips have almost completely gone. We used to get about £250 on average a month – it’s split evenly between waiting staff and chefs. Now we get under a tenner. It’s a big cut to us. Hospitality is relatively low paid and we’re dependent on that extra cash. I don’t think people realise. I think it’s down to apps. We’ve lost that face-to-face interaction. Nothing’s as personal any more."
These problems led Unite the union, who have been campaigning on this issue since 2016, to organise protests outside of a branch of PizzaExpress and outside of the Department for Business, Energy and Industrial Strategy (BEIS) back in July 2021, and there has been considerable criticism of the practices of some restaurant groups in the press.
The new legilslation will benefit around 2 million workers, employed in around 190,000 businesses in the hospitality, services, and leisure sectors
The New Proposed Legislation
The new legislation on tips for staff to be introduced as part of the forthcoming Employment Bill will provide:-
- A legal requirement to pass on all tips to staff
- A new statutory code of practice setting out rules and regulations on how tips are distributed amongst staff
- A right for employees to request information from their employer regarding their tipping records, and a legal right for employees to bring a claim before an employment tribunal should they believe that they are owed money relating to tips
Tips For Staff: Reaction To Announcement
Announcing the new legislation regarding tips for staff, the Parliamentary Under Secretary of State (Minister for Small Business, Consumers and Labour Markets), Paul Scully, stated: "Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service. Our plans will make this illegal and ensure tips will go to those who worked for it. This will provide a boost to workers in pubs, cafes and restaurants across the country, while reassuring customers their money is going to those who deserve it."
Nevertheless, the national officer for hospitality of Unite the union, Dave Turnbull, stated: "We are pleased that our calls for a code of practice have been heard, but such a code must not leave workers open to abuse of unfair distribution systems such as at Pizza Express where tips are being used to subsidise wages of workers in a disproportionate way. Unite - as the largest union for hospitality workers - should be closely involved in the discussions which develop this statutory code."
Turnbull added: "For those that have been working in the sector since 2016, we calculate, based on a survey of our Pizza Express members, that hospitality workers have lost on average £2,000-a-year in tips which is disgraceful. We regard this as a first step to stamping out the long hours culture and exploitative working environment that bad employers have got away with for far too long in the UK hospitality sector."
