Have businesses reached a Tipping Point?

Businesses in the hospitality industry will soon be asked their views about the way in which they deal with customer tips.

There is currently no legal requirement for tips to go to workers and whilst there is a voluntary code of practice on tips, gratuities and service charges, it is clear that not all businesses are transparent about their practices.

Last year, some well known restaurant chains came under attack for not passing on tips to their staff.  Others were criticised for automatically adding a service charge to customers’ bills leading to ‘double tipping’.

In response, the Government has launched a consultation to look at how businesses charge and distribute customer tips with a view to improving transparency and fairness.

The consultation paper asks for views about a number of proposed changes including:-

  • Stopping employers from making deductions from service charges (except for those required under tax law).
  • Banning businesses from recommending specific values for such charges.
  • Increasing transparency for consumers by making it clear that tips and service charges are voluntary as well as making it clear where the payments actually go.
  • Updating the existing voluntary code of practice on tips, gratuities and service charges by giving it statutory effect.
  • Banning or restricting the levying of table sales charges on staff

Lisa Kemp, Employment Solicitor :” Tipping is a large feature in the hospitality, leisure and service industry and many employees feel that tips should be retained by them for personally delivering exceptional service.  Despite the negative press reports, there are many businesses that are already very clear about how tips are dealt with.  Some employers see passing on gratuities to staff as a way to incentivise them to deliver excellent customer service which in turn increases footfall and profits. We await the outcome of the Government consultation to see which way this tips.”


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