Government plan to make tip deductions unlawful

Peninsula Team

October 17 2018

Speaking during the annual Conservative party conference, Prime Minister Theresa May announced the government’s plans to introduce stricter regulations around tips at work, thereby preventing employers from being able to deduct from money given as tips to staff.

Existing legislation offers very little on the subject of workplace tips, apart from confirming that these monies cannot be used to make workers’ wages up to the National Minimum Wage (NMW) limit. Whilst a Code of Best Practice also exists, this simply encourages employers to have a workplace policy in place on tips which explains how they will be distributed and if any deductions will be made.

The Prime Minister’s announcement follows earlier sentiments made back in 2016, in which she first declared her intention to abolish the practice of tip deductions. However, no such legislation was ever put into place. On this occasion she has declared that appropriate legislation will be introduced at the earliest possible opportunity to ensure affected staff, who often work in the hospitality industry for little over NMW, receive the full amount of tips that relate to their service.

This announcement has come following a summer of protests around workers’ rights, and in particular the ‘unfair’ practices relating to the deduction of tips. Staff working for organisations such as TGI Friday’s have joined campaign groups to protest against employers who routinely deduct money from tips and service charges to cover separate business charges, such as credit card administration fees.

This move also follows a continuing trend of initiatives designed to improve the working rights and financial security of low paid staff, many of whom work in the much publicised gig economy. One example of this is HMRC’s continued efforts to both fine and publicly name and shame employers who fail to pay staff in line with NMW law.

With this being said, employers who currently deduct money from staff tips may continue to do so until further notice as there have been no further details released on how this new law will be applied or any expected implementation date. However, given the potential for this issue to cause unrest amongst the workforce, employers should consider moving away from this practice as soon as possible ahead of the change in law.

Whilst some employers may be dissatisfied with the thought of no longer being able to deduct money from staff tips they should consider the benefits of this situation. Most notably, if staff are aware that they are guaranteed to receive the full amount of tips there is the likelihood that performance and productivity levels will increase accordingly in an effort to obtain greater funds from clients and customers.

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