Can employers withhold tips from workers? 

Firms urged to prepare for tipping practice reform 

Back in 2015, a number of restaurants were accused of keeping tips paid by customers by credit and debit cards. In effect, these hospitality businesses were said to have kept the service charge added to the final bill instead of passing it to their employees.

These allegations were denied, but it raised an important question of whether staff were receiving tips and gratuity paid by customers. Given recent research suggests that 80% of all tipping transactions are made via cards, the government decided that legislation was needed to stop such exploitation. 

The Employment Bill brought before Parliament 

As a result, The Employment (Allocation of Tips) Bill has been brought before Parliament, with the aim of:

• Placing a requirement for employers to pass all tips, gratuities and service charges to workers without any deductions other than those which are required under tax law.
• Providing a Statutory Code of Practice to ensure fairness and transparency on how tips should be distributed including via ‘TRONC’ systems.
• Allowing workers the right to request information relating to the employer’s tipping record, meaning businesses will need to have in place a written workplace policy on tips, gratuities and service charges.
• Allowing employees to take the matter to an employment tribunal for compensation if the rules are breached. Additionally, the employer could also face fines for non-compliance.

Are the rules in place?

Not yet, but they look to be on the horizon. The Bill is in its second reading before Parliament and, subject to any further amendments, will proceed to receive Royal Assent around a year or so before it becomes law. 

As a result, businesses distributing tips and gratuities to staff have some time to prepare for its introduction.

To start, employers are urged to review their policies and procedures well ahead of the expected introduction of The Employment (Allocation of Tips) Bill. 

This article was contributed by HR and H&S specialist, Quest. To learn more and discuss your HR compliance with an expert, please click here.