A ‘tip’ for those in hospitality

A ‘tip’ for those in hospitality

How to deal with tips has been a bone of contention between employers and employees in the hospitality sector for quite some time, but this might be about to change.

How does tipping work?

Traditionally, the salary of hospitality staff has been relatively on the low side, on the basis that they are usually topped up by the tips and gratuities received from customers. The better the service given, the more tips earned. Whilst on paper this seems to make sense, in practice, it’s not always the case.

Currently, any cash tips given belong to the employee and should be for them to keep in their entirety, however tips given by card technically belong to the employer, who can choose whether or not to pass it on.

Proposed changes

Whilst it’s not the practice of all employers, there are some who either keep a portion of the tips or charge 10% “administrative costs” if the tips were made via debit or credit card; and it’s for this reason that the Government is looking to change the rules.

The biggest change to the legislation will force employers to pass on all tips, gratuities, and service charges, without making any deductions.

A new fair code of practice is also being considered which will require employers to fairly distribute tips, with an emphasis on transparency.

Employees will also be given the opportunity to request information on the employer’s tipping record, which inadvertently puts a requirement on the employer to be open and upfront with their tipping practices.

What should employers do now?

Employers should be aware of the proposed legislation amendments and ensure that they comply if the changes come into force. This will include implementing the code of practice, distribute tips in a fair and transparent matter, and ensure that deductions are not taken from any tips so that employees receive the full and correct amount.

The Government is aiming to update the legislation on tips as soon as reasonably practicable but will allow employers approximately a year to amend their business practices where required to fully implement the new system.

If you would like further advice on how to make your tipping practice compliant with the proposed changes or would like us to review your employment contracts, please get in touch with a member of the team on 01752 663295.

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