Restaurants, along with taxi firms, hairdressers, hotels, pubs and cafes, may be forced to increase prices in response to a new tip-sharing law coming into effect this October. The new regulations, launching on Tuesday this week, will prohibit these businesses from withholding tips or service charge payments from their employees, whether paid in cash or by card.
Kate Nicholls, the Chief Executive of UK Hospitality, has stated that businesses have “been gradually getting ready for this” and are moving towards adopting a code of best practice endorsed by unions.
Saxon Moseley, Head of Leisure and Hospitality at consultancy RSM, says: “Those that have been using the service charge to pay staff or to partly offset their wage bill are still going to have to pay their staff, but now won’t be able to draw on this cash fund.” He adds that this could lead to a significant hit on margins in some cases.
Michael Powner, Employment Partner at Charles Russell Speechlys, highlights the challenges of reaching a fair agreement, stating: “Employers need to ensure that what is agreed is ‘fair’ and that there is rational reasoning in place, while avoiding any potentially discriminatory rules.”
Bryan Simpson, who organises hospitality staff for the Unite union, has also voiced his opinion on the matter.
He highlighted that some are “deliberately misinterpreting the new fair tips legislation to suit business needs rather than the workers”. “We will be doing everything in our power industrially, politically and legally to ensure that any unfair tipping policy is challenged,” he stated.
The legislation aims to enhance the income of approximately two million waiting staff and other hospitality employees. The government is set to introduce the law on Tuesday, over eight years since a ban was initially proposed.