New law to be passed to ensure workers get to keep tips from customers
The government has recently announced its intention to introduce legislation to ensure that workers get to keep tips that are left for them by customers.
Currently, there are no laws governing what happens to discretionary service payments (tips) that are intended for workers. A voluntary code of practice was introduced in October 2009 with the aim of encouraging employers to deal with such payments in a fair and transparent way. At the same time, it became unlawful for employers to use tips, gratuities, and cover charges to make up payment of the national minimum wage. However, concerns grew that many workers were still not receiving a fair deal when it came to tips.
In particular, there were reports of:
- Workers being charged excessive administration fees by their employer for processing tips.
- Employers keeping discretionary service payments in their entirety.
- Employers raising a sales charge based on the sales made by individual waiting staff during their shift rather than the discretionary payments for service received. The waiting staff would be required to pay the sales charge from the discretionary payments for service they collected during their shift.
As a result of these concerns, a consultation was launched in 2015 to investigate whether the government needed to legislate in this area rather than rely on a voluntary code of practice. You can read the full details of the consultation: HERE.
The consultation asked for views on:
- How businesses could make it clear to customers that discretionary service payments are voluntary;
- Whether businesses should be permitted to suggest a certain amount for service;
- How to limit or prevent employers from imposing charges on staff or making deductions from service payments; and
- How to encourage tronc systems (a system whereby tips are pooled and shared out among staff and which is managed separately from the employer) and how such systems could be managed more efficiently and fairly.
The proposals suggested by the consultation to increase transparency and fairness included:
- Preventing or limiting any deduction made by employers from discretionary service payments.
- Requiring the troncmaster to consult with staff before charging them for the distribution of payments.
- Making tronc requirements statutory.
- Requiring employers to have in place a written policy for workers, explaining the systems in place for dealing with discretionary payments.
- Requiring businesses to tell customers that discretionary service payments are just that; voluntary; and clarifying that such payments do not contribute to the national minimum wage of staff.
- Placing the voluntary Code of Practice on a statutory basis so that it can be considered by courts or tribunals when determining liability for related legal duties.
Following the closure of the consultation, the government announced in October 2018 that it intended to introduce legislation to make sure that tips left for workers would go to them in full.
Move forward two years and it appears that the government is now keen to get the reforms underway. In its recent announcement, they stated that “while some businesses have changed their practices since the consultation ran, others continue to unfairly retain monies intended for their workers and be opaque about their practices to their customers. As we recover from the current economic crisis, it is important to ensure some unscrupulous employers do not gain a competitive advantage over others, and that consumers continue to have confidence in service industries.”
The upcoming Employment Bill will introduce the following new legislative measures:
- Employers in all sectors will be prohibited from making any deductions from tips received by their staff, including administration charges, other than those required by tax law.
- There will be a requirement for employers to share out tips in a way that is fair and transparent, with a written policy on tips and a record kept of how tips have been managed.
- Employers will be able to distribute tips via a tronc system.
- Tips will have to be dealt with no later than the end of the month following the month in which it was paid by the customer.
- There will be provisions allowing workers to request information about an employer’s tipping record.
- Employers will have to have regard to a statutory Code of Practice on Tipping.
- Where employers fail to comply with these measures, enforcement will be enabled through the employment tribunal.
As yet the government has not said when the new laws will be in force, but it plans to bring forward the bill when “Parliamentary time allows”. Once enacted, it will be another year before the new rules come into force. This means that it will be some time before workers will be able to enforce these future rights in an Employment Tribunal.
However, it also means that any businesses which have not already changed their practices have time to review their current arrangements for dealing with discretionary service payments and to put in place measures to ensure that they are compliant in time for when the new laws come into force.
We have been advising on tips policies and tronc master processes for some time now and can assist you in preparing and ensuring you are ready for the changes. Do not hesitate to get in touch for your no-obligation quote.