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Government shelves plans to let staff keep 100% of tips

Written by Kate Palmer on Friday, 10 June 2022. Posted in Politics, Analysis

In the midst of the ongoing cost of living crisis, workers were gutted to hear of the government’s lack of priority for protecting extra income.

Government shelves plans to let staff keep 100% of tips

In the midst of the ongoing cost of living crisis, workers were gutted to hear of the government’s lack of priority for protecting extra income.

In September 2021, the government announced plans to introduce a new law that would make it unlawful for employers to withhold tips from hospitality workers. But, such plans have now been put on hold, leaving workers potentially thousands of pounds out of pocket, whilst boosting profit margins for greedy employers. This hits at a time when individuals are already struggling with soaring living costs, placing further financial burdens on household incomes.   

The proposed legislation would have given enhanced protections to staff members by entitling them to keep 100% of the tips they earn. This includes service charges added to card payments and cash tips given directly to workers. However, the Bill wasn’t included in this year’s Queen’s Speech, following leaked information that the prime minister has shelved such plans for now. Initiatives which are not included in the annual Queen’s Speech are not on parliament’s agenda for the next 12 months. As a result, it will be May 2023 at the earliest before consultation on the matter is likely, with further time then needed to confirm and implement any new laws. 

Consequently, it remains legally permissible for employers to take a percentage cut of the tips and gratuities given to their workers, with some organisations choosing to keep up to 100% if they wish. Those who do so should, however, be aware of the detrimental impact it could have on employee relations. Where staff are working hard to earn tips, many will be discouraged when they don’t see a return on their efforts. Withholding tips can contribute to reduced motivation and engagement, higher turnover rates and poor overall performance, leading to further expenditure from organisations who have to pay out on training and recruitment costs more frequently.  

Therefore, employers should not see this as an excuse to do nothing. Instead, by pro-actively implementing policies and procedures to ensure the fair distribution of workers’ tips, businesses can benefit from improved retention and productivity, with employees driven to achieve communal goals. 

Firstly, employers will have to identity how they will fairly distribute tips amongst their teams; they may also need to work with their payroll providers to ensure tips are reflected in employees’ take-home pay. However, doing so could pose some logistical issues in ensuring all employees are given a proportionate share of tips. Some employers might choose to give an equal allocation to all employees regardless of their role in the organisation. However, others might prefer to only give staff tips that they were directly involved in earning – e.g. the service charge or total cash tip on the particular table they were serving. 

Whilst it is expected this will have a positive impact, since employees are receiving the full reward for their hard work, issues may arise over staff not believing that tips are being shared fairly. As such, it’s beneficial for employers to have a clear plan in place, which can be communicated to their teams, to minimise any resistance or grievances. The new Statutory Code of Practice, when released, will provide information to help businesses better understand how to do this, to ensure fairness and transparency.

Non-compliance with the legislation may lead to credible employment tribunal claims, where the subsequent compensation payments and reputational damage could prove detrimental for organisations. 

Ultimately, despite new laws being put on hold for the time being, employers can still greatly benefit from voluntarily introducing contractual agreements to safeguard staff earnings. However, it’s important for them to carefully consider how they will implement this in practice, to ensure fair and equal treatment for all.

About the Author

Kate Palmer

Kate Palmer

Kate is involved in all aspects of HR and employment law advice. She develops Peninsula’s expert law advisors and ensures each client gets the answers they need every time they call. As an industry opinion leader, Kate’s expertise is frequently sought. She is regularly featured on national television and radio as well as in major publications, both industry and press. Kate is a Chartered Fellow of the CIPD.

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