Employment

Restaurants banned from keeping tips as government admits minimum wage is not enough

New rules will make it illegal for employers to withhold tips from staff, and could face an employment tribunal if they do.

A waiter pours red wine into a glass. Restaurants must now give all tips to staff.

Restaurants must now give all collected tips to their employees and provide a record. Image: Andrea Piacquiado/Pexels

The “shameful” practice of withholding tips from hospitality staff has been banned, the government has announced, in a move which also appeared to acknowledge that the national minimum wage does not cover living costs for millions of people across the UK.

Under the new legislation, designed to help around 2 million workers, employers must pass any and all tips to staff and give workers the right to request a record of tips to see whether they have been ripped off.

Moves towards a cashless society, sped up by the pandemic, have made it easier for bosses to either keep waiting staffs’ tips paid by card, or make their own decisions on how to share them out within the company. 

In the same breath announcing the new plans, The Department for Business (BEIS) acknowledged that “most hospitality workers – many of whom are earning the national minimum wage or national living wage – rely on tipping to top up their income.”

The Living Wage Foundation welcomed the changes but pushed for the government to ensure full-time work provides enough money for people to live on.

“Any move to improve pay in low-paid sectors like hospitality is welcome, but if this work is to be truly valued we need to see more people lifted onto a real Living Wage,” the foundation’s interim director, Graham Griffiths, told The Big Issue. We all need a wage that meets our everyday needs.”

The Living Wage Foundation encourages employers to pay their staff £9.50 an hour, whereas the national living wage  – the legal minimum for those aged 23 and above – currently stands at £8.91 per hour.

 The national minimum wage is lower, at  £8.36 per hour for those aged 21 or 22, £6.56 for 18 to 20 year-olds, and those under-18 can be paid £4.62.

For someone working a full-time job in a 35-hour working week and earning the national living wage, gross income would work out at about £17,300 per year before tax or pension deductions. 

The new legislation “will provide a boost to workers in pubs, cafes and restaurants across the country, while reassuring customers their money is going to those who deserve it,” said Paul Scully, labour markets minister. 

A change in the rules has become urgent as government research shows 80 per cent of all UK tipping now happens by card. Some businesses that add a discretionary service charge to customer’s bills were keeping part or all of that cash, instead of passing it to staff.

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Unite the Union have held a long running campaign for legislation on tips, saying the government’s five-year delay had cost waiting staff an estimated £2,000 per year each in lost tips.

“It’s shocking that this group of mainly young workers has had to wait five years for government action to tackle the tips scandal,” said Sharon Graham, Unite’s general secretary.

At present, there is no compulsory code for businesses when it comes to tipping by card. 

Multiple hospitality chains have been hit by scandals over the years when it has emerged that senior managers have diverted waiting staff’s tips into their own, or another part of the company’s, pockets. 

Pizza Express faced backlash from waiting staff in May after they announced a slice of their tips would be cut to increase the pay of kitchen workers in the highstreet pizza restaurants. 

Waiting staff saw their earnings nosedive, as their share of tips paid via credit and debit cards or the company’s app was suddenly reduced from 70 to 50 per cent, reported the Guardian

The move is part of the government’s Hospitality Strategy designed to help pubs, bars and restaurants recover from the pandemic. 

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