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Home / News and Insights / Blogs / Employment Law / 344: Tips to be paid to staff in full

In its recent response to the 2016 consultation on tipping, gratuities, cover charges and service charges, the government has confirmed its intention to introduce legislation requiring employers to pass on all these sums to workers in full, without making any deductions. More recently, as the United Kingdom has moved towards becoming a cashless society (particularly during the COVID-19 pandemic), there has been mounting pressure on the government to implement these plans. Approximately 80% of tips are now paid by card, making it easier for businesses to retain a proportion before passing the rest to staff. The response also notes that the current voluntary code of practice which aims on increasing transparency and managing discretionary payments is not being widely used.

The new legislation will include:

  • employers in all sectors will be prohibited from making any deductions from discretionary payments received by staff, including administrative charges, except as required by tax law;
  • tips must be distributed in a way that is fair and transparent;
  • employers must have a written policy on tips and keep a record of how tips have been dealt with;
  • tips may be distributed via a tronc, and all tips must be dealt with no later than the end of the month following the month in which they were paid by the customer;
  • workers will have the right to make a request for information relating to their employers’ tipping record. Employers will have to respond within four weeks;
  • employers will be required to have regard to a statutory Code of Practice on Tipping; and
  • workers will be able to bring claims in the Employment Tribunal where employers fail to comply with these measures.

The government will implement the new legislation in the long-awaited Employment Bill, the timing of which remains unknown. In the meantime, employers should review their policies and practices on tipping, in case changes are required.

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