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Tip-top news for employees

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Tip-top news for employees

A Government report published on 24 September 2021 outlined plans to overhaul tipping and gratuity practices, following a consultation on the matter in 2016. 

Employers will have a better idea of what might need to be done to comply and how it might impact cash flow!

Service charges to employees

Consultation was necessary because research showed that many businesses kept all or part of service charges, instead of passing them onto staff. With cash being used less frequently, the increase in card usage has accelerated these practices as businesses have to choose whether they keep the monies or pass them onto workers when tips are received in this way. 

The use of cash and card for your business

The Government’s plan intends to create consistency between the use of cash and card, promote fairness and transparency and ensure businesses who are not treating workers fairly are penalised.

This is welcome news for those in hospitality who may rely on tipping to top up their income as the new measures will deliver a financial boost to these individuals. It is also good for consumers who can be satisfied that their discretionary tips are going to whom they were intended for. 

Employers will, however, need to think about how this proposal might affect their business – whether they pass on all or part (to a greater or lesser extent).

The headlines from the proposed legislative measures are below:

  • Employers in all sectors will not be permitted to make any deductions from tips received by their staff, other than those required by tax law.
  • Employers will distribute tips in a way that is fair and transparent, provide a written policy on tips and keep a record of how tips are dealt with.
  • Workers will be able to make a request for information regarding an employer’s tipping record. Employers will have to respond within four weeks.
  • There will be a Statutory Code of Practice on Tipping that employers will need to follow.
  • Where measures are not complied with, employees will find recourse in the Employment Tribunal.

The Government has said that the Bill will reach Parliament when time allows and, once passed, the rules will come into effect one year after to give employers time to consider and prepare. Our best guess is the Bill won’t be passed until next year at the very earliest and therefore rules won’t come into effect until 2023.

You can read the full report, here:

Once the draft Bill is published employers will have a better idea what might need to be done to comply and how it might impact cash flow but until it is passed there will remain uncertainty. We’d be happy to chat through how this might impact and your options at this early stage. 

It would require any more information on this topic, please contact Rianna via or call 01245 453812.