Expert warns of 'unintended consequences' of tipping legislation

A tipping expert has warned of “unintended consequences” that can come with legislating, following news that a bill is being brought forward to enshrine in law that all tips must go to staff.

There is so far no published draft available of the Private Member's Bill that is being brought forward by Watford MP Dean Russell.

“Until we see the detail, it’s very difficult to make a judgment call on it,” said Peter Davies, client service partner at WMT Chartered Accountants and managing director of WMT Troncmaster Services.

However, he said there were questions to be considered: “There is a risk, as always with all legislation, that if it’s not well drafted, if it’s not thought through, there is the law of unintended consequences and you end up damaging businesses that are fair and do things in the right way.

“In what is now an increasingly cashless society, people will [often pay with card] and an element of that money will be taken by the card provider. That can be anything up to 2.5% of the value of the tip. Who’s going to pick up the tab for that? The cost of that across the sector would run into millions of pounds. Things like that need to be thought through.”

He added: “We all know there have always been a very small minority of businesses that have not played fair by their customers or their staff. Those businesses do need to be brought into line, but I’m not sure that legislation is the right way to do it. I think greater openness and transparency will shine a light on those businesses that don’t do the right thing, and consumers are free then to make their own decisions.”

The bill is expected to go to a second reading on 10 September.

Five years ago, the then business secretary Sajid Javid led a consultation into tips, service charges and troncs, and former prime minister Theresa May said a ban on employers making any deductions would be introduced at "the earliest opportunity".

The government committed to deliver an Employment (Allocation of Tips) Bill to ban employer deductions from tips in the Queen's Speech in 2019, although it later said this would come under a wider Employment Bill rather than a specific tips bill.

The Employment Bill is understood to have not yet been drafted and the Queen’s speech earlier this year did not mention it, however the government has reconfirmed that it will bring forward an Employment Bill, including legislation on tipping practices, “when the time is right”.

A spokesperson from the Department of Business, Energy and Industrial Strategy (BEIS) said: “We firmly believe that workers should get the tips they deserve, and consumers should have reassurance that their money is rewarding staff for their hard work and good service. We will bring forward the Employment Bill, which includes legislation on tipping practices, when the time is right."

That could still take place in this Parliamentary session, but there is at this point no specific legislation before Parliament or timescale for the bill to come forward. However, the statement confirming an Employment Bill is still on the cards suggests that the government will not back Russell’s Private Member's Bill, without which support such bills rarely become law.

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