Tipping and Gratuity – Employees to get their Fair Share in new Legislation Proposals - Vista
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Tipping and Gratuity – Employees to get their Fair Share in new Legislation Proposals

Have you ever left a tip and wondered whether all of it will be going to the person you actually tipped?

Currently there is no legislative authority on the percentage of tips that must go to the employee. The legislation in this area only states that tips cannot be included as part of a person’s pay for the purposes of the national minimum wage.

Back in 2009 when the government made this change, it also produced a Code of Best Practice which encouraged transparency for the customers and employees. However, this did not provide legal remedies to employees who were short changed.

In response to this, the government consulted again in 2016, the conclusion of which led the government to propose legislation in 2018 that would include:

  • A requirement for employers not to make any deductions from tips,
  • For distribution of tips to be more transparent, with employers required to have specific policies on tips,
  • To make sure tips are distributed by, at the latest, the end of the month following the month the tip was made,
  • Provisions to allow employees to enquire on how tips were dealt with, to which employers would be required to respond within 4 weeks,
  • A requirement for employers to have the Code of Best Practice in mind, and
  • Provisions to allow employees to bring a claim at the tribunals.

These provisions were intended to be included within the Employment Bill and to be introduced when Parliamentary time allowed.

With Brexit and Covid-19 Parliamentary time has been limited, but an update from the Secretary of State for Business, Energy and Industrial Strategy has indicated that the government still plans to bring this legislation in.

What’s the update?

Whilst the detail will be in the forthcoming legislation, the intention is to provide employees the ability to claim under the existing unlawful deduction of wages legislation for tips withheld or deductions made. We may even see penalties similar to those used for flexible working requests, if an employer fails to respond to an employee’s enquiries within the proposed 4-week period.

Whilst the phrase “when Parliamentary time allows” appears to be a vague statement, this latest announcement makes it clear that the government is serious in its plans to bring in legislation on tips.

What can employers be doing to prepare?

It may be sensible for organisations to start preparing now, by:

  • Reviewing if any tips are being withheld
  • Whether deductions are being made
  • Introducing a clear policy on the distribution of tips (guidance for introducing new policies here!)

Not only will this help ensure your business is prepared in advance, but it will also support organisations in attracting and retaining the best staff in a competitive market.

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