A new joint study by HOSPA and UKHospitality into public opinion on tipping has revealed that one in two admit to being anxious when asking for a service charge to be removed.
With the Employment (Allocation of Tips) Bill receiving Royal Assent in May, new legislation is expected to come into force in the spring of next year that will impact tipping in all forms – be that restaurants, cafes, pubs, hairdressers and even taxis.
The fundamental change will see 100% of tips paid to staff – with it becoming illegal for an employer to take any percentage of tips, even if used to cover direct costs.
The legal changes come as research from the Hospitality Professionals Association (HOSPA) and UKHospitality, two leading voices in the hospitality sector, suggests that the UK public is very much in favour of tipping – with 81% of people claiming to be regular tippers.
As part of a joint study into public opinion on tipping, which came from a survey of 1,000 UK adults, digging down further found that 82% preferred that any tip goes directly to the person serving them – a statistic which suggests the public is in favour of the general principles of the new legislation; that of 100% of tips going directly to staff.
Just 18% wanted the tip to be distributed to the team beyond those directly serving them.
The research also questioned the preferred methods of tipping – with the overwhelming preference (71%) being to see a tip added separately, while just 17% wanted to see it automatically added as a service charge. 9% of those who responded wanted to see tipping scrapped altogether, while a further 7% felt a tip should be factored into the initial pricing (and not added as a service charge).
Regarding service charges, the research also found that one in two people, 53%, feel anxious about asking for a service charge to be removed from a bill.
With the changes to tipping set to impact businesses operating across the spectrum of hospitality, HOSPA has shared the implications for hospitality workers and guests following an industry debate which called on numerous fields of expertise.
From a legal perspective, this legislation has not yet been tested and remains open to interpretation — with the majority of provisions within the act not set to come into force until secondary legislation is established and a code of practice is released. However, following the event, HOSPA has outlined the key implications as to how things currently stand:
Operators must now pay 100% of the money earned through tips and service charges to staff — meaning it is illegal to withdraw money earned from tips out of the pockets of hospitality workers.
It will be the duty of the employer to fairly allocate all tips, gratuities and service charges that are collected amongst workers, employees and agency workers.
Employers must have a written policy that deals with tips in the workplace to be shared with all employees.
Employers must keep a record of how every tip has been dealt with — including the tip amount and the amount that’s been allocated to workers. This record must then be maintained for a period of 3 years from the date that the tip was paid.
Employees and agency staff can bring a new claim to the table during employment tribunals regarding the allocation of tips.
New information requirements and an information request process mean workers can ask for information every three months as to how their employer is fairly allocating tips.
It’s taxable. From an employment tax perspective, it’s taxable. Whether through self-assessment or taxed through a tronc arrangement. However, there are national insurance contribution savings to be made through the use of a tronc.
Jane Pendlebury, CEO of HOSPA, commented, “In short, 100% of all income from gratuity tips and service charges has to go to the employee. For guests, there’s no real change to the hospitality experience – they’ll just know that unscrupulous employers can’t take an unfair cut, and they can be reassured that good service is fairly rewarded.”
She added, “There are questions from an operator’s perspective, though, as fair distribution across the full team can incur legitimate costs to organise, which the public, understandably, isn’t likely to be aware of.
With hospitality businesses across the UK already experiencing serious cost pressures through the rising cost of living and stock and staff shortages, this bill will be seen by many, especially those who use tips to boost revenue, as another cost pressure — with the threat of tighter guidelines and greater penalties for poor compliance.”
HOSPA’s tipping event, which took place at the BT Tower in London on Thursday, 29th June, consisted of a panel including front-of-house representation, legal and financial experts and a troncmaster, who discussed the impact of the new legislation while also looking at the wider culture of tipping.
A public consultation for employers on tipping practices is set for later 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.
The research, which questioned 1,000 UK adults, was conducted by 3GEM Research and Insights on behalf of HOSPA and UKHospitality.
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