Tipping bill could see 2 million workers get the cash they deserve

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New legislation called the Employment (Allocation of Tips) Bill that has now passed its second reading in government could mean that two million workers across the UK will be able to get their tips directly.

Since COVID-19, and a subsequent greater move to a cashless society, it’s easier for restaurant managers, hairdressers, drinks workers and more to withhold tips from staff and instead funnel the money elsewhere. From service charges added on by default to tips left on card machines, it’s estimated that 80% of all UK tipping happens cashless now.

The introduction of this bill finally ends the question “will my tip go to the person who served me?” as this bill guarantees that every tip, service charge or gratuity fee goes straight to the people who’ve earned it, not to the business owners.

What does the new tipping bill suggest?

As put forward by Dean Russell, the MP for Watford, this bill would mean that every employee who gets tips receives them in full, including gratuity or service charges. The employees who receive them and how they are doled out are agreed by a ‘tronc’ and then tips would be paid with payroll but outside the scope of deductions, such as tax or student loans. A ‘tronc’ is a group of workers who agree to the split of tips amongst staff, ensuring even distribution.

In practice, the bill would make it illegal for employers to withhold the full tip payment from their employees. It’s estimated around 2 million tippable workers would be better off because of this law change.

Alongside the bill, parliament are proposing a Statutory Code of Practice that will set how tips are distributed to ensure fairness. The actual logistics of this are still being worked out. And there will be new rights for workers to enable them to see an employer’s tipping record to ensure they’re fairly tipping everyone.

Speaking in the House of Commons in July, Dean Russell said “People who work in hospitality should not need to rely on tips as part of their salary. I am absolutely clear in the Bill that it is not about topping up salaries; it is about a gratuity, tip or service charge in addition. However, employees should be able to keep them. That should be at the heart of what we do, and that is what this Bill will do.”

How could the Employment (Allocation of Tips) bill work in practice?

The bill mainly comes into force where tips are allocated to a central pot, before being distributed outwards. For example, if tips are taken both on card as a service charge, and in cash but added to a central pot, then the bill would come into action here.

Essentially, the bill is there not to regulate employers that already give 100% of tips to staff, instead, it will ensure that those employers who deduct 15% of existing tips for “admin charges” or employers that don’t evenly distribute tips are held accountable, and that staff get their fair share.

It could work through a more formalised tronc system, an evenly distributed amount per staff, or a set percentage per hour.

The other interesting point to consider is with companies such as Deliveroo or Just Eat, similar takeaway services, or other sectors outside of the expected scope. At the minute Deliveroo and UberEats give riders 100% of tips, but with JustEat, it’s dependent on the restaurant. This regulation could make it easier for transparency regarding who gets the tip and ends the ongoing debate of the employer taking some as a service charge.

When could this bill become law?

At the minute, the bill has only passed its second reading in parliament, meaning that it could be a while until we see this become law. However, it is worth noting that because of its relevance as we head into a recession, we could see it sooner rather than later.

How would the tipping bill affect payroll?

At the minute, tipping practices vary by company. With that comes a difference in how staff are paid. Some could get a percentage of tips at the end of every shift, others may receive it with their weekly or monthly payments.

Part of this bill would be to make sure that no deductions are made against tips and to formalise the recording of tips. An easy way to do this would be to use a digital payroll system, which could easily allow for input of total tips earnt, and then attach these to each employee’s payroll.

For employers, they’d have to keep a record regardless of how they decide to formalise this process, so using a digital system that links with a payroll app would be an easy way to solve that problem.

Why not try Staffology today? We regularly update our software with the latest regulation changes, making it simple for business owners across multiple sectors. Get a demo today.

Duane Jackson, October 6th, 2022

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