New legislation to end unfair tipping practices and increase transparency for consumers and employees were announced by the Government today. The new legislation will ensure that service industry workers get all of the tips left by customers.

The government previously made a call for evidence on tipping practices in 2015, followed by a consultation on proposals to ensure fairness for workers.

The proposals in the consultation included:

  • updating the voluntary code of practice on discretionary service payments to put it on a statutory footing;
  • increasing transparency for consumers to ensure that discretionary payments for service are truly voluntary; and
  • preventing or limiting any employer deduction (e.g. administration fees) from discretionary payment for service (other than tax deductions).

The government is clear that ‘tips must go to the workers providing the service’. However, it remains to be seen specifically what the new proposed legislation will cover, in particular whether it will address the practice of employers using tips left for waiting staff to subsidise the wages of others such as kitchen workers.

Date Published: 3 May 2016

New Plans to End Unfair Tipping Practices

New plans to end unfair tipping practices and increase transparency for consumers and employees were announced today (2 May 2016) by the Business Secretary Sajid Javid.

Following a call for evidence on the tipping practices in the hospitality, leisure and service industry last year (2015), the government has launched a consultation on its proposals to secure a fairer deal for workers.

The consultation paper reflects the evidence received from consumer, worker and employer groups, and sets out the government’s proposals for the handling of tips and service charges. They include:

  • updating the current voluntary code of practice and putting it on a statutory footing to increase employer compliance
  • increasing transparency for consumers to make it clearer that suggested discretionary payments for service are discretionary and that consumers are free to choose
  • preventing or limiting any employer deduction from discretionary payments for service, except for those required under tax law

Business Secretary Sajid Javid said:

We’ve been very clear. As a one nation government we want workers who earn a tip to be able to keep it. That’s why I, like many others, was disappointed by the tipping practices of some of our well-known chains. This has to change.

Today I’m setting out our proposals to make tipping fairer, clamping down on unfair practices and securing a better deal for the millions of workers in the service industry. We will look closely at all the options, including legislation if necessary.

Underlying all the proposals is our aim that additional payments for service should be voluntary to the consumer; received in full by workers where appropriate; and transparent to the consumer who makes them.

Currently there is no legal requirement for the treatment of discretionary payments for service regarding the proportions that go to employers and workers. The voluntary code of practice was introduced in October 2009 to improve the information available on tips, gratuities, cover and service charges and to increase transparency in this area.

The call for evidence received nearly 200 responses and there was broad agreement that current practices were not clear for workers or consumers, and change was needed to better understand how tips are distributed.

Worker groups called for a requirement for 100% of tips to be paid to workers. The majority of customers would prefer to see all tips either going to the employee (61%) or shared in a tronc without any employer control (23%). Employers were more supportive of retaining the current treatment of discretionary payments for service; maintaining their flexibility to reward workers but increasing the transparency of actions.

In addition the government is considering:

  • whether to ban or restrict the levying of table sales charges on staff – a fee paid by waiting staff based on their sales during a shift
  • how to incentivise and increase the prevalence of well managed tronc systems.

A recent survey by OpenTable found that 87% of UK customers always leave a tip and that the average percentage of the bill left is 9%.

The consultation closes on 27 June 2016.

New Legislation to End Unfair Tipping Practices

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