The new Employment (Allocation of Tips) Bill means workers in restaurants, pubs and hotels will receive 100% of their tips in order to make it transparent to customers how tips are shared out among employees.
During the State Opening of Parliament, Queen Elizabeth said: “My Government will take steps to make work fairer, introducing measures that will support those working hard.”
Foot the bill
However, UKHospitality has shared concerns that this new legal obligation may force the hospitality sector to foot the bill with another tax.
UKHospitality chief executive Kate Nicholls said: “That may mean measures to cap or remove charges to hospitality businesses altogether.
“We already have a clear, transparent and fair voluntary code of practice regarding the collection and sharing of tips.
“The code makes it clear to businesses, employees and customers how tips can be fairly shared so that all team members get what they deserve and customers can be confident that the money they tip is going to the correct place.”
Nicholls continued: “Legislation on tipping threatens to add another unwanted burden on businesses at an already very hectic time.”
The announcement comes more than three years after a consultation into tips, service charges and troncs was led by then business secretary Sajid Javid.
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.
The Licensees Association chief executive Nick Griffin said: “We welcome laws that increase fairness for the wonderful staff that work throughout our industry and we look forward to seeing the detail of the bill and the code of practice that accompanies it.”
Who will bear the cost?
Griffin continued: “Of course, the devil will be in the detail of any bill and while it may grab headlines to say staff will receive 100% of all tips, there is still much we need to understand about how this is to be done.
“The increase in payment by card in itself is a thorny one. Up to 80% of all tips are now paid by card and this is only set to rise.
“Transactions are usually liable to a fee based on a percentage, who bears this cost?”
Griffin added that while the key to any adopted system is that it is transparent and fair, it must be ensured any relevant taxes are levied at source on increased income to make life as simple as possible for employees.