Q- My client has heard that the law on dealing with tips is going to change. He runs a restaurant and currently passes on only 75% of tips to the employees. Will he be able to carry on doing this?
A- Recently, many high-profile businesses have attracted criticism for making tip deductions and using the funds to cover business charges in other areas. Although taking a percentage of tips given to employees can be common practice for employers it can also be significantly frustrating for the workforce. Despite the fact that a voluntary code of conduct for fair tipping procedures exists there is currently no law prohibiting employers from making deductions from tips. However, this position is due to change.
New proposals, announced by Prime Minister Theresa May, will mean that employers in hospitality will have to pass all tips received from customers to workers. Whilst it remains unclear how this is likely to apply to gratuities paid through cards or automatically applied service charges, this new move may essentially prohibit your client from continuing to take any money given to employees through tipping. The aim will be to allow consumers to personally reward the hard work of the individuals who have served them.
It is currently unknown when this will come into effect and how the legislation surrounding it will be constructed. However, your client would be wise to evaluate their current pay practices on the distribution of tips, alongside any documentation in place on this practice. This will help them to be in a strong position to implement any new restrictions that will be placed on them once the legislation is introduced. Your client should bear in mind that there is uncertainty surrounding how this will be implemented operationally and it is currently unknown whether it will aim to ensure that tips are being shared between all staff, including those who do not have any interaction with customers, or if the tips have to go in their entirety to the person who served the customers.
Despite the fact that there is no definite date as of yet for these changes, with the Government stating it will be ‘as soon as Parliamentary time allows’, your client should be fully prepared to make any necessary amendments to workplace policies. They may find themselves facing a potential shortfall in profits once the restrictions are introduced. If this is the case, they may need to consider looking elsewhere in order to maintain the balance between profit and outgoings.