New law to protect workers’ tips delayed
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. 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. 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 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.
In doing so, employers will have to identity how to 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, this could pose some logistical issues. 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.