Millions of hospitality staff set to be affected as new legislation on tipping comes into force
Millions of UK workers are set to take home an estimated £200 million more of their hard-earned cash, as new legislation on tipping will be coming into force.
The Employment (Allocation of Tips) Act 2023 comes into effect from Tuesday, October 1, and will require hospitality businesses to distribute 100 per cent of customer tips and service charges to staff, with no exceptions other than standard-rate tax deductions.
The changes also make it mandatory for all hospitality businesses to have a written policy accessible to staff on how tips are dealt with at their place of work.
Many hospitality workers rely on tips to top up their pay and are often left powerless if businesses don’t pass on service charges from customers to their staff.
This overhaul of tipping practices is set to benefit more than two million UK workers across the hospitality, leisure and services sectors helping to ease cost of living pressures and give them peace of mind that they will keep their hard-earned money.
Join our new WhatsApp Community to get the latest news and top stories from across Lancashire directly to your phone. The new report issued this week also revealed how the government’s Employment (Allocation of Tips) Act 2023 will push hospitality operators to breaking point, with 83 per cent of respondents expecting to incur costs of at least £12,000 a year to comply - the equivalent of 118,690 UK operators.
Nearly one in five (18 per cent) claim costs could increase by £60,000 to £360,000 a year under the new regulations.
The report, ‘Tipping Point: How new legislation will impact hospitality’, commissioned by three rocks®, a leading customer experience technology specialist for the hospitality sector, surveyed 1,000 hospitality businesses, 1,000 customers and 500 staff in the UK to gain their insight into the new government legislation and to understand feelings towards tipping.
The study included UK hospitality businesses of all sizes, from independent operators to national restaurant, pub and bar chains.
It revealed that there could be a better and fairer alternative tipping process to the Employment (Allocation of Tips) Act 2023.
Nearly half (44 per cent) of operators would support the creation of a Tipping Standard Practice, an official tip amount implemented ‘across the board’ for customers and a standard process for businesses to distribute tips to staff.
Sign up for our free newsletters now 59 per cent of staff support the concept, with 27 per cent saying it would make financial planning easierand a further fifth saying it would be a fairer system for everyone.
An overwhelming 73 per cent of the 1,000 customers polled agreed it was a good idea.
The study also delved into tipping behaviour, revealing that nearly three quarters (74 per cent) of UK hospitality companies either already, or plan to, add a service charge as standard for smaller tasks such as serving a pint, preparing a cocktail, checking people in or carrying luggage.
Nearly 1 in 3 operators will add a service charge of between 5-10 per cent for such tasks, suggesting that the UK is heading towards an American-style service charge, where 20 per cent is the standard gratuity for all types of service. Scott Muncaster, founder and Managing Director of three rocks®, said: “Tipping has long been a sticking point for customers, staff and businesses, with many not knowing what to expect, what to give, or how to spread tips out among employees.
“The research shows that clarity and transparency is needed to help all three parties find a standardised process for tipping.”