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Dispute resolution

In an attempt to add an extra layer of protection to the rights of hospitality workers in the UK, the government has announced plans to introduce new legislation to regulate the custom of tipping.

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It has become a recognised standard practice across the hospitality industry for customers to leave tips for workers who are considered to have provided a good service. In addition to this, it is also common for businesses in the industry to add service charges to customers’ bills, particularly where the booking is for customers of more than 6 in number, some of which are discretionary and some which are not. Although cash tips have been protected for some time to ensure they go directly to the staff members they are intended for, it was revealed in recent years that some employers were habitually keeping all or a percentage of customer tips paid by card, in order to enhance their own profits and top up their own salaries.

Over the years, the government has looked into the distribution of tips and established that it was more than just a handful of unscrupulous employers holding on to tips meant for staff. After consulting with workers, organisations and other stakeholders, the government has acknowledged that something needs to be done with Labour Markets Minister Paul Scully last week commenting:

“Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service. Our plans will make this illegal and ensure tips will go to those who worked for it. This will provide a boost to workers in pubs, cafes and restaurants across the country, while reassuring customers their money is going to those who deserve it.”

Those plans are now about to become law with new rules about to be introduced.  The new rules will make it illegal for businesses to retain tips and service charges paid by customers using credit and debit cards, consistent with the policies previously adopted in respect of cash tips. It is understood that an implementation date is imminent, so these plans which for a long time have been a distant pipedream for workers in the industry, will very soon be put into place.

The new legislation will make it unlawful for workers in the industry to be deprived of this additional income and workers will also have legal recourse to bring a tribunal claim against their employer if the legislation is not being respected and followed.

The rules will:

  • Require all employers to distribute all tips to staff without any deductions whatsoever.
  • Introduce a Statutory Code of Practice which will set out how to ensure the fair and transparent allocation of tips.
  • Offer new rights for workers to have access to their employer’s tipping records to support any tribunal claims.

Employers will therefore no longer be able to deduct money under the guise of processing fees for tips left by customers using credit or debit cards. In a society where cash is becoming an increasingly less favoured method of payment, owing in part to the pandemic and the government encouraging contactless transactions to reduce exposure to COVID-19 and other viruses, the plans are welcomed with open arms by the circa 2 million workers in the industry whom it is envisaged the new measures will help.

At a time when several businesses in the industry are struggling to fill vacancies as many once loyal workers migrate to other industries offering flexible working patterns, it is hoped that the legislation will lift the morale of workers that many consider to be overworked and underpaid. Whilst we are not currently seeing people flocking to the  hospitality sector for work, at the very least it is hoped that this new legislation will incentivise those who remain to stay put.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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