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Last updated: 25 Apr 2022
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Government Bill expected on ‘fair’ tipping imminently

Around two million people work in one of the 190,000 businesses across the hospitality, leisure and services sectors, where tipping is commonplace. Hospitality workers, many of whom are earning the National Minimum Wage or National Living Wage, rely on tipping.

It’s estimated that around 80% of all UK tipping now happens by card, rather than cash going straight into the pockets of staff. Businesses who receive tips by card currently have the choice of whether to keep them or pass them on to workers. However, government research shows that many hospitality businesses that add a discretionary service charge onto customer’s bills are keeping part or all of these service charges, instead of passing them onto staff. As such, the government is set to introduce legislation designed to overhaul tipping practices.

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Samantha McCarthy

+44 (0)20 7556 1227
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It’s estimated that around 80% of all UK tipping now happens by card, rather than cash going straight into the pockets of staff. Businesses who receive tips by card currently have the choice of whether to keep them or pass them on to workers. However, government research shows that many hospitality businesses that add a discretionary service charge onto customer’s bills are keeping part or all of these service charges, instead of passing them onto staff. As such, the government is set to introduce legislation designed to overhaul tipping practices.

What can we expect to see in the legislation?

What can we expect to see in the legislation?

In the government’s 2016 response to the consultation on tipping gratuities, cover and service charges, it stated “The government believes that all discretionary payments for service, after tax where appropriate, should be received by the worker; or managed separately from the employer through a tronc system.”

Therefore, in accordance with the government’s response, the legislation is expected to include:

  • A requirement for all employers to pass on tips to workers without any deductions, potentially no later than the end of the month following the month in which it was paid by the customer.
  • A Statutory Code of Practice setting out how tips should be distributed to ensure fairness and transparency.
  • New rights for workers to make a request for information relating to an employer’s tipping record, enabling them to bring forward a credible claim to an employment tribunal.
Should you act now?

Should you act now?

Any hospitality business that is utilising tips, gratuities, and services charges in any way and not passing these in full on to their staff must act now. It is expected that tronc systems will remain in place and, without question, these are the most cost-effective way of passing tips onto staff. With employers expected to be required by law to pass on all tips in full to staff, National Insurance Contribution (NICs) exposure will increase, at a time when both employers and employees NIC is set to rise. Therefore, there has never been a more vital time to ensure you have an effective rewarding tronc system in place. The benefits of implementing a tronc system are:

  • The arrangement can be genuinely independent, free from employer interference, run for the benefit of staff.
  • Offer significant savings to staff and businesses through exempt NIC.
  • Staff can get up to 100% ownership of their hard-earned tips with a say in how they are shared out.
  • Improve staff motivation and retention as employees feel valued and rewarded.
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