Insights
We seem to be at a tipping point when it comes to tips. In October last year, Theresa May said that the government would be introducing a ban on employers in the hospitality sector from making deductions from staff tips (other than those required under tax law).
We’re yet to see the law come into force in the UK, with Business Minister Kelly Tolhurst suggesting that the Bill will come into play sometime after the next session of Parliament, which begins in the summer.
But the proposed legislation has, unsurprisingly, touched a nerve with the sector which is concerned about the effects of introducing the new law at a time when costs are mounting for operators.
In response to the Prime Minister’s initial announcement, UKHospitality chief executive Kate Nicholls said she felt that the sector was already doing a good job of distributing tips fairly among staff, after the trade body developed a Code of Practice for firms to follow.
"As a result, best practice has been promoted across the sector and we see no evidence of tips being withheld across restaurant chains,” she added.
She also pointed out that some operators may retain "a small amount" from card tips to cover "the not inconsiderable costs of credit card charges and processing payments".
Tips are not a ‘bonus’
Jason Horn, Client Success Manager here at HGEM says that this point about there being an element of cost to tipping for operators, when customers use their card to tip, is a valid one. But he’s not as definite on whether the legislation was as unnecessary as Nicholls suggested.
“In some instances, we’ve seen businesses take tips and put them towards an end-of-year party or bonus for the team – but that’s not what tips should be used for,” he stressed.
“The company should be paying for those things out of its own pocket if it believes the team has done a fantastic job over the course of the year. What if somebody can’t make it to the party? They stand to lose out altogether.”
Sharing tips equally
Another discussion point around the legislation is about ensuring that all staff are rewarded equally for their efforts.
Rich New, Client Insight Manager at HGEM says that distributing tips in the monthly pay packet goes some way to making sure that all staff – both back- and front-of-house – get an equal share.
“With it being put through payroll, employees have visibility on what they’re earning each year, which is a good thing,” he says.
“But we need to be careful that, once all the deductions have been made, employees, who have worked hard for their tips, aren’t losing out.”
Rich has also floated the idea of tips becoming a non-taxable item – which might help customers feel like their gift is going into the right people’s pockets.
Customers’ perceptions of the new law will be key, as ultimately they’re the ones doing the tipping.
Giving staff the pay they deserve
There’s even an argument for taking away the tipping altogether, Jason says.
“The best practice would be to say “we’re not going to accept tips anymore; we’re just going to pay people what they deserve”. Workers shouldn’t have to rely on tips to earn a decent wage.”
Rich agrees, adding that the traditional tip jar is open to discussion about who’s earned what, which can make for unhealthy disagreements.
“The walk-outs at TGI Fridays last year were a case in point. The chain took money off the front-of-house staff and redistributed it to back-of-house staff. But waiting staff were finding themselves a couple of hundred pounds down each month.”
It’s clear that the issues surrounding tipping are not going to go away even with the new legislation. But do we agree that it’s a step in the right direction for the sector?
