Tipping legislation: What hoteliers need to know

Tipping hoteliers

[Credit: Blake Wisz on Unsplash]

Jane Pendlebury, CEO of HOSPA, outlines some key considerations for hoteliers to best prepare for the Tipping Act when it comes into force later this year.

The UK hospitality industry is bracing for significant changes as new tipping legislation is set to come into play. If you’re sitting there thinking – what new tipping legislation? Then, the good news is it’s been delayed. Initially set to come into force in July 2024, the latest update sees it put back until October 2024.

So, while the positive is that you have more time to prepare, the bad news (if you want to call it that!) is that the legislation is coming into play – whether you’re prepared for it or not.

But what is the new tipping legislation?

Put simply, hotels and other hospitality businesses must now pay staff 100 per cent of tips. There’s no longer the option to keep some back to cover sundry expenses. All must go to staff.

So what does this mean for hoteliers when it comes to handling tips?

Well, the Code of Practice behind the legislation was published on 22 April 2024 and it outlines how the final legislation will look when it does come into effect. The full code is available to read on the Department of Business and Trade’s website, but here’s a summary of what it contains and the implications for hoteliers.

Purpose of the Tipping Act: To ensure fair and transparent allocation of tips, improve fairness for workers, and to create a level playing field for those employers who already allocate all tips to employees.

Employer obligations: You must pass on all tips to workers without deductions (except for income tax). You must distribute tips fairly and transparently across your team. You must have a written tipping policy and make it available to all workers (including agency workers), and you must maintain a record of all tips paid and their allocation.

What scope does this cover: Qualifying tips include employer-received tips or worker-received tips that are subject to employer control or influence. Non-monetary tips can also count as qualifying tips if they are controlled by the employer. The Act applies to all ‘workers’ – but not self-employed individuals.

Fairness: Allocating and distributing tips fairly doesn’t necessarily require you to allocate the same proportion of tips to all workers. There may be legitimate reasons why employers choose to allocate different workers different proportions of tips. Employers should use clear and objective factors for tip allocation. These factors may include type of role, basic pay, performance, seniority, and so on. When applying them though, employers must avoid unlawful discrimination and take extra care to do so.

Methods of allocation and distribution: Tips can be distributed directly by the employer or through a tronc. Tronc arrangements must be fair and independent. Tips must be distributed to staff at the latest by the end of the month following the month of their receipt.

Transparency: Employers must have a written tipping policy. This can be distributed electronically or as a physical written document – and must include an accessible version for workers with a disability should they request it. The policy should detail tip acceptance, allocation, and distribution. Tips records must be maintained and made available to workers upon request and be maintained for a period of three years.

Addressing problems: Employers should have fair processes for resolving any issues related to tips. Workers can seek recourse through Acas (the Advisory, Conciliation and Arbitration Service) or the employment tribunal system if issues remain unresolved.

That then, is a summary of what the latest draft of the Code of Practice implies for hoteliers and other operators, but I encourage you to read it yourself to gain further insight.

Last year there was much debate as to whether or not the legislation was a good thing. At HOSPA, we conducted public research into the sentiment around topping, teaming up with UKHospitality to do so. Surveying 1,000 UK adults, we found that the public were very much in favour of tipping – with 81 per cent of the people who responded claiming to be regular tippers.

The study also found 82 per cent preferred that any tip goes directly to the person serving them – a statistic which suggests the public is in favour of the general principles of the new legislation; that of 100 per cent of tips going directly to staff.

On top of this, and as an aside, the research also questioned the preferred methods of tipping – with the overwhelming preference (71 per cent) being to see a tip added separately, while just 17 per cent wanted to see it automatically added as a service charge. Nine per cent of those who responded wanted to see tipping scrapped altogether, while a further seven per cent felt a tip should be factored into the initial pricing (and not added as a service charge).

The results suggested that the public’s view of tipping chimed with the proposed legislation. We understand, however, that the issue is complex, with back-room teams and associated other costs involved that the public might not know about. Some operators and owners will view the legislation in a less than welcoming light than the public might.

Whether you’re in favour of the legislation or not is a moot point. The fact is, it’s coming into force. And whether or not you were ready for the initially suggested July deadline – you now have more time to prepare.

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