Some new legislation, known as the Tipping Act, around how tips are received and distributed by businesses has come into effect on October 1st. The new law aims to strengthen workers’ rights to tip money and is expected to put £200million back into their pockets.
The law forces companies to give 100% of all tips, gratuities and service charges to the hard-working employees who earned them and no deductions will be allowed to affect them. If an employer breaks this law, by retaining tips or taking off fees, a worker can bring their claim to an employment tribunal.
While most employers already follow this rule, more as an ethical code before it became law, the legislation will crack down on businesses who don’t do this and it could greatly affect a customer’s experience at certain establishments. Customers likely won’t need to change how they attend or tip at these venues, but may find a staggering difference in price during the coming months.
The law forces businesses to align with the public desire for transparency as well as the employee’s desire for fairness but could see venues raising prices, adjusting service charges or using other methods to cover the expenses these tips used to go towards. This is expected to be particularly true for smaller businesses where tips or service charges may go towards covering sundry expenses like card transaction charges.
Sacha Zackariya, author of Leading Travel and Tourism Retail, told the Express that the rise in service charges over the past few years may have been a tactic by some businesses to cover the rise of costs on their end. This would have enabled them to keep the prices that the consumer sees low by covering the difference with the service charge, a tactic which will likely need an entire restructuring following this legislation.
He noted: “It’s worth noting that tipping in many other European countries, such as Spain or Italy, consists of a few coins or a low denomination note. The flat service charge rate should really be lowered so tourists do not feel they are being ripped off from both the inevitable price increase of the food and drinks. Better to just let them know the true price when they look at the menu – not their bill at the end.”