Fears over impact of tipping law on seasonal hospitality

Seasonal hospitality businesses are at risk of losing “a lot of experienced people” as a result of new tipping legislation, a tronc expert has warned.

The Employment (Allocation of Tips) Bill, which will make it unlawful for businesses to hold back service charges from their employees, received Royal Assent in May.

It is expected to fully come into force in April or May 2024, following a consultation and secondary legislation.

Tronc experts have warned the law, which will require tips to be paid out monthly, could cause cashflow issues for businesses that hire large numbers of seasonal agency workers.

Under the plans, agency workers will receive the same cut of tips as direct employees, despite some receiving higher pay.

Katie Linstead, lead product manager at Troncmasters Limited, told The Caterer: “The new legislation will affect seasonal businesses most because of the inability to smooth out pay. That means a lot of experienced people will move out of those businesses and [the businesses] will suffer.”

The new law was discussed at HOSPA’s Tipping Debate on 29 June at the BT Tower in London.

Linstead spoke alongside Charlie Barnes, legal services director at RSM UK Legal LLP; Jacqui Roberts, employment tax director at BDO LLP; and Giuseppe D’Aniello, head sommelier at the London Edition.

Linstead added: “It’s already a huge burden on operators to collate all the data and we can see the involvement of agency workers as a big problem.

"The point is to encourage employment, but if agency workers receive higher wage plus tips, that doesn’t. I think it’s really important the industry is as educated as possible on what’s happening.”

Further issues

Barnes said the bill was currently “open to interpretation” and there was confusion around what it would define as a place of business, and whether this was limited to a single site or multiple sites operating under the same brand.

The Caterer understands multi-site operators are concerned staff may want to move to venues that are known for receiving more tips if new legislation forbids the pot from being shared out between sites.

The Department for Business and Trade confirmed it will launch a public consultation for employers on tipping practices later this year, with the Code of Practice coming into force next year.

HOSPA and UKHospitality have said they will participate in the development of the Code.

Linstead said the Code would offer something “more transparent”, but admitted she was “nervous the consultation won’t reach as far as it needs to”.

However, D’Aniello said the legislation could offer greater “control” to employees, as in the past, companies could make “extra revenue” from “crazy high” service charge.

When asked whether the law could mean all team members could start demanding a cut of service charge, not just food and beverage and stewarding staff, Barnes said it was currently limited to “employers and workers” but there had been no further legislation to clarify this.

The new law will also give staff the power to take any grievances related to tips to an employment tribunal, which could award a compensatory order of up to £5,000.

A spokesperson for the department for Business and Trade added: “Our legislation on tipping will apply to both agency workers and those directly employed by businesses – ensuring the fair and transparent allocation of tips, gratuities, and service charges to millions of workers.”

It comes after Dean Russell, the MP behind the bill, reassured hospitality operators that “everyone wants to get this right for businesses” when he spoke to The Caterer in May.

The Conservative MP for Watford had said: “My goal has been to make sure that this isn’t burdensome or creates red tape, but ultimately enables fairness for everybody involved.”