Treatment of tips and gratuities to be considered in parliament

Malcolm Ireland, partner and head of Harrison Drury’s leisure and licensing team outlines the potential changes for employers in the leisure and hospitality sector with regards to allocating tips to employees as a new bill is likely to change the current requirements.

Legislation surrounding the treatment of tips has been raised and challenged since 2018, but has been delayed on multiple occasions. There is, however, now a concerted effort to bring this forward in a bid to make progress on the issue and place protections in law, with a Tips Bill having been brought forward by MP Dean Russell on Monday June 21, 2021.

The current law on the management of tips

There is no specific legislation in place with regards to how tips should be handled by the employer. The only legislation currently in force is that tips cannot be used to meet national minimum wage obligations.

As it stands, employers can require employees to disclose all tips, and place a ban on employees taking tips, however this is not considered best practice. The government has issued a code of practice covering the issue and outlining what employers should be doing in respect of tips, but this code is currently completely voluntary.

Proposals for the Tips Bill

The Tips Bill is still in the early stages and nothing concrete has been discussed as to what the final legislation will enforce.

The proposals in short aims to add fairness and transparency in respect of tips and may require the employer to pass on all tips to the employees in full. The legislation is also likely to provide detail as to how this would operate in practice.

Actions for employers in the leisure and hospitality sector

Employers in the leisure and hospitality sector should ensure they are keeping up to date with any movement in respect of this legislation. Although you are likely to already be following much of the best practice, the legislation may require certain steps to be taken in relation to tips and the distribution of them to employees.

The Tips Bill is due to have its second reading in the House of Commons on September 10, 2021. We will keep you updated on the development of this legislation and our team are on hand to provide advice as necessary.

If you are an employer in the leisure and hospitality sector and wish to review your current management of tips allocation among employees and want to ensure you keep up-to-date with planned changes to legislation please contact Harrison Drury’s leisure and licensing team on 01772 258321.