top of page

How to avoid the hospitality industry tipping over the edge

HOSPA Founder Howard Field looks at the plans to change the law around tipping

Legislation has been proposed to ‘enshrine the rights of waiters and other staff to receive all of the money left by customers’ as tips. UK restaurant and other hospitality business owners who retain any part of tips and service charges paid by guests have been characterised by the media and by MPs in parliament as ‘unscrupulous employers’

A Tips Bill is being promoted as a private members bill, strongly supported by Unite the union. On the government web site it is described as ‘A Bill to prohibit employers retaining tips and gratuities intended for staff; to make provision about the division of tips and gratuities between staff; and for connected purposes’. A second reading is scheduled for September.

It is timely to take a wider look at some of the key issues involved – before it’s too late.

  • There are no common practices in the UK hospitality industry about whether tips are expected or service charges apply in restaurants or other businesses. This situation creates confusion for staff and the public – especially tourists.

  • On top of this, there are no standards for at what level and for whose benefit these payments or charges are made – and widely varying percentages are applied.

  • Advantageous taxation and wage treatments of tips and service charges unique to the industry - including allowing certain restaurant or hospitality employees and their employers to avoid national insurance and other contributions on substantial elements of their earnings - are significant drivers of current practices.

  • In many businesses, the owners are actively involved with and part of the teams in the day to day operations.

Before the details of any legislation are finalised, the debate should consider:

  1. Is it necessary for government to intervene between businesses, their employees and the public about how they construct their terms of trading and employment - beyond ensuring that these are fair, clear and transparent?

  2. The taxation anomalies that have influenced current practices have created imbalances, externally with terms of employment in other businesses, and internally between employees in different departments. Are they justifiable ?

  3. How and why legislation will affect:

  • The freedom of a restaurant or hospitality business to decide to allow tipping and/or apply a service charge

  • In which parts of the operation (eg restaurants, bars, functions, accommodation) and at what levels service charges are applied or tips expected

  • Which categories of staff should be entitled to receive the tips or service charges (eg service staff, kitchen, back of house or other departments; and what about working owners)

  • What shares of distributions should belong to which staff

If a new law is deemed to be necessary, it must be equitable for the public, employers and employees, and taxpayers – and simple to apply and control. This subject is not new, and government could instead work with the hospitality industry to facilitate modernising of its atypical employment practices and the impact of the taxation anomalies.


bottom of page