Taking Control of Tipping – Changes Ahead for Employers Following Government Response to Consultation

Oct 7th, 2021

Marie Horner, Partner

In the UK, tipping is common practice in the hospitality, leisure and service sectors, but also an important element of pay in industries such as hairdressing and private car hire, yet the law in this area is generally seen as quite vague, particularly when it comes to the question of employers passing tips on to staff.

Currently, a deduction from staff tips is likely to be unlawful unless it is required by law or permitted by a term of the employment contract or by prior written consent. The method for distributing tips should not be discriminatory or likely to breach trust and confidence, and the employer cannot count tips processed through payroll towards the payment of the national minimum wage. However, with the right contractual terms in place, how tips are distributed can currently be dictated by the employer.

In September, the government responded to the 2016 consultation on tipping, gratuities, cover and service charges, indicating an intention to require employers to distribute tips in a fair and transparent way, to prevent employers from taking “administrative fees” or other deductions out of staff tips, and to ensure that employers have written policies and records of distributions.

There also looks set to be provisions in place for workers to request information about the employer’s tipping record and to receive a response to that request within 4 weeks, and an obligation for employers to follow a statutory Code of Practice on Tipping in place of the current voluntary code.

The Bill has yet to be enacted but the new rules are expected to come into force no earlier than 1 year after the enactment, so employers have a bit of time yet to prepare any adjustments to their current practices.

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