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17th October 2019

Legal Issues – Tips and gratuities

Background

Tips and gratuities are an integral part of certain industries, perhaps most notably in hospitality. Indeed, many restaurant workers rely heavily on tips to supplement their income, as their basic pay tends to be limited to the national minimum wage.

The issue of tips has gained media attention in the last few years, as it became clear that some well-known restaurant companies were deducting fees from tips before passing them to workers. Chains including Pizza Express, Ask, Café Rouge and Zizzi were found to be taking between 8 and 10% of tips as an ‘admin fee’, leading to outcry from unions.

Similarly, it was discovered that other big names were passing some tips to management as well as workers. Even as recently as September 2019, Carluccio’s has been in the spotlight for bringing in a new system that has made a lot of its front-line workers worse off due to managers being given a bigger cut of the tip pot.

A significant part of the problem around tips is the lack of legislation on how they should be handled. The government investigated the issue in 2015 and found unfair practice, which led to it consulting on potential changes. Almost 70% of those who responded to the consultation stated that tips should belong to workers and that employers should not be involved.

Last year, the government announced plans to make changes to the law, but until now we hadn’t seen any further development. However, the topic was mentioned in the Queen’s Speech this month, and we now have a rough idea of what the new laws might look like.

Employment (Allocation of Tips) Bill

The proposed legislation sits within the context of the government’s Good Work Plan, which outlines proposals to modernise employment law and protect workers from exploitation and abuse.

As a basic summary, the legislation will require employers to pass on all tips to workers in full and, where they distribute tips amongst workers, to do so on a fair and transparent basis. There is also a planned code of practice on tips, that employers will be required to follow.

As yet we don’t have the exact detail of the legislation, or what will constitute a ‘fair and transparent’ process. It’s also not clear what any enforcement measures might look like, but we will issue further updates in due course.

In the meantime, if you have any questions on any of the issues raised in the above article, please contact Seanpaul McCahill.

17th October 2019