Changes to tipping rules to become law after clearing House of Lords

A bill that will prevent employers from making deductions from staff tips has cleared the House of Lords and will receive Royal Assent to become law.

Conservative peer Lord Robathan introduced the Employment (Allocation of Tips) Bill to the Lords for its third and final reading on 21 April.

He said: “Most businesses already allocate tips fairly to their staff, but, regrettably, a minority have not done so.

“That gives the staff, who are often among the least well-paid in the hospitality sector—waiters, for instance, and others, stretching beyond the hospitality sector, but in particular waiters—the opportunity to insist that they are given the service charge that many of us in restaurants pay whenever we go to a restaurant, so they get the tips rather than the money going to the profits of perhaps a big company.

“This does not happen that much but does happen a bit, and we need to make sure it does not happen at all.”

Peers expressed cross-party support for the bill as it passed through the final stage of scrutiny in the House of Lords, despite no amendments having been made since members warned of ‘unintended consequences’ during its second reading.

In March Labour peer Lord Mitchell had voiced concerns about several aspects of the legislation including that agency workers will need to be paid tips at the same level as directly employed staff.

Mitchell had also questioned the inability for employers to deduct costs associated with the processing of credit card payments and a stipulation that would prevent tips being pooled across multiple venues under the same group.

In relation to his first point Conservative peer Lord Johnson said the issue would be dealt with in a code of conduct, which will accompany the bill after it receives Royal Assent, although it is unclear how this could be achieved.

The new tipping legislation will mean that operators must pay teams 100% of tips, making it illegal to withhold any money from workers.

The government has estimated the additional costs to be borne by businesses as a result of the bill, which prevents money gathered by tips being used for administrative costs including credit card permissions, will be approximately £140m.

The new legislation also gives staff the power to take any grievances related to tips to an employment tribunal, which can award a compensatory order of up to £5,000. The tribunal will also be able to give a similar order to every other affected worker, even if they have not brought a claim themselves.

The government had originally launched a consultation into tipping practices in 2015. After several delays the private member's bill was introduced to Parliament by Dean Russell, Conservative MP for Watford.

Your questions answered: Find out how the Employment (Allocation of Tips) Bill will impact your business in this report from The Caterer’s tipping summit