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A Review of the Government’s Employment Bill Overhaul of Tips & Gratuity Practices for Employers

Good news for those working in hospitality and other industries where employees rely on tips to top up their take home. The UK Government recently passed an Employment Bill that overhauls the tips and gratuity practices for employers. The new law, which won’t come into effect until 2024, makes it illegal for employers to withhold tips from their employees. This means that all tips left by customers, whether paid in cash or by card, must be passed on to the employee in full.

How does the new law protect employees?

The new law is designed to protect workers and make sure they receive the full benefit of their tips. It also provides clarity for businesses so they know whether they’re toeing the line when it comes to tips. 

The new Employment Bill has been welcomed by many, including trade unions and workers’ rights groups. However, some businesses have expressed concerns about how much it will cost them to be compliant and are worried about the potential for the law to be abused.

It remains to be seen how the new law will be implemented and the impact it’ll have on businesses and workers. But it’s a positive step forward in protecting workers’ rights and making sure they receive the full benefit of their tips.

Benefits of the new law

There are several benefits to the new law, including:

  • Increased staff retention. It will help to reduce staff turnover in the hospitality sector, as workers will be more likely to stay in jobs where they know their tips are given out fairly.
  • Increased earnings: It’s estimated the new law will collectively boost earnings for workers by £200 million per year. This will be particularly welcome for the many who’re facing rising living costs.
  • Better transparency. The new law will increase transparency in the tipping process, which could help to prevent fraud and abuse.
  • Improved customer service. Employees paid a fair wage are more motivated and better placed to deliver good customer service. As we know ourselves, a happy team makes for a better business. 

Challenges with the new law

There are a few pitfalls that come with the new law, such as:

  • Increased compliance costs. Businesses will need to put new systems and procedures in place by 2024 to make sure they’re compliant with the law. This could mean spending money and extra work for those behind the scenes. 
  • Potential for abuse. There is a risk some businesses may try to circumvent the law by misclassifying tips as wages, or through other methods to avoid paying tips to their employees.
  • Unclear enforcement. It’s unclear how the law will be enforced, which could leave businesses and workers uncertain about the way forward.

Overall, the Employment Bill is a positive step forward for workers’ rights. But, as well as the benefits, some challenges need addressing to make sure it does what it was designed to do. If you’ve got any questions about the ins and outs of paying your staff or, in particular, payroll then get in touch today.