With the Employment (Allocation of Tips) Bill having received Royal Assent in May, the new legislation is expected to come into force in the spring of next year.
And with it set to impact a wide range of hospitality businesses, HOSPA, the Hospitality Professionals Association, has hosted a debate to hear from industry voices to assess what it means for hospitality operators.
Taking place at the BT Tower in London on Thursday, 29th June, the tipping event saw an array of views and perspectives, as a panel discussed the impact of the new legislation and its implications for the industry, while the event also looked at the wider culture of tipping.
Featuring front of house representation in the form of Giuseppe D’aniello, Head Sommelier at The London Edition, as well as legal and financial expertise from Charlie Barnes, Legal Services Director at RSM UK Legal LLP, and Jacqui Roberts, Employment Tax Director at BDO LLP, the event also called on insight from troncmaster, Katie Linstead, Lead Product Manager at Troncmasters Limited.
Alongside their expert input, the panel also fielded questions from the audience.
The far-reaching implications of the new bill were discussed, with the overall sentiment in the room being one of support towards the 100% distribution of tips and service charges.
In principle, most seemed to agree the new legislation was a positive step forward – but there were questions regarding deducting direct costs, such as credit card charges and Troncmaster fees (none of which are allowed) as well as queries on VAT and National Insurance contributions.
Jane Pendlebury, CEO of HOSPA commenting on the implications, said: “The new regulations will require employers to share the income with the employees before the end of the month following receipt of the tips (or service charge). There are many valid reasons why employers in seasonal businesses in particular have previously opted to ‘smooth’ the distribution of tips over the course of a year – not least to protect their employees. The fluctuation in income can affect those who benefit from Government support. With peaks and troughs in pay packets rather than a steady income stream, payment of benefits can be adversely affected.”
She added: “The issue of exactly who should be included in a share of tips created some lively debate and particular interest around the inclusion of agency workers in the distribution of cash, and also where to draw the line. Will we also see claims from departments not previously included in the distribution of service charges requesting their fair share of the tips? Whilst fairness, honesty and transparency were frequently used words throughout the debate, another underlying worry centred on unwelcome employment tribunals from disgruntled staff.”
Charlie Barnes, sitting on the panel, highlighted the complications around the allocation of tips, with additional costs and the administrative burden set to fall on hospitality businesses going forward. He said: “There are information requirements such as policies that will have to be produced. And also, there's an information request process from workers where they can ask you every three months for information about how you are fairly allocating tips. That's also something to bear in mind from the perspective of the administrative obligation that it could create.”
Giuseppe D’aniello said that tips had been a part of his salary since joining the industry 12 years ago, but acknowledged there were issues in allocating them. He felt the new legislation would “improve fairness” and stop “big companies” making “extra revenue” with “crazy high” service charges.
Speaking from the audience, Howard Field, a founding member of HOSPA with many years of involvement in this subject said: “This is so much more complicated than we can imagine. And what's gone on in parliament has only scraped the surface. What worries me is that the legislation is cementing in place out-of-date practices. These will only inhibit the introduction of more forward thinking and truly fair ways to treat employees and customers. I have seen little change in the chaos of tips and service charges and about what's right and what’s wrong for all parties.”
A public consultation for employers on tipping practices is set for later on this year to help determine a formal Code of Practice that will come into force next year. Once agreed, HOSPA will update its Tips, Gratuities, Service Charges and Troncs guide to help employers make the right decisions.
Jane Pendlebury, concluding, said: “There were some fascinating insights from the panel, as well as interesting questions from the audience who were very much engaged with the topic. The legislation is set to have an impact through the industry, and whilst implementation is still some way off, businesses need to ensure they’re aware of it and planning for any impact.”
The full debate can be watched via: https://www.youtube.com/watch?v=zuv6XDZF5d0&ab_channel=HOSPA