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Tipping and Gratuities - A legal update

Napthens - May 25th 2016

In October 2009, the Government of the day put in place a voluntary Code of Practice with the intention that this would improve the information available concerning the treatment of tipping, gratuities, cover and service charges and to increase transparency.

Following concern that this voluntary Code of Practice was ineffectual, the Department of Business, Innovation and Skills have now launched a consultation looking at these additional payments.

This follows the Call for Evidence which was launched on 30th August 2015 with the purpose of investigating how additional payments had been treated by employers as the Government remain concerned about the transparency of such practices to both consumers and workers. As well as the transparency issue, the consultation also focused on three specific areas of concern: employers charging an administration fee for handling service charges; employers keeping the whole of a service charge; and employers charging workers a fee based on table sales.

Within the consultation launch report, the Government claims that the Call for Evidence revealed a broad agreement that intervention is required to improve the treatment and transparency of these payments and that all discretionary payments for service should go to the worker or be shared amongst workers without involvement from an employer. As such, the report outlines the following options that the Government considers would address the issues:

  • Ensuring that consumers are aware and that it is clear that discretionary payments are just that and that they are free to choose
  • Making the Code of Conduct statutory
  • Putting a restriction on employers being able to deduct sums from discretionary payments, except when required for tax-law purposes.

The Government appears to favour the use of Tronc systems where tips are pooled and the employer takes no part in deciding how the pool of tips is shared out between staff. As a result of this, the Government is also looking to how these can be promoted across the sector, perhaps with incentives.

Clearly, should the proposals from this consultation become law, this will have some impact on the those businesses in the Leisure and Service Industries who currently have some interest in discretionary payments. Those business or individuals who wish to respond to the consultation they can do so through the Department of Business, Innovation and Skills website  and must do so before 27th June 2016.