Hospitality Tips Law Means Staff Keep Money

Under a new law, it will be illegal for employers to withhold tips and service charges from workers in hospitality, leisure, and service sectors. This will be welcomed by an estimated 2 million people who will now have a section of their income protected by law.

With a sharp rise in contactless and card payments during the pandemic, you’ve probably noticed a lot less cash in your till at the end of your shift. And whilst it certainly makes cashing up at the end of the night easier, it’s having a detrimental impact on one particular area of the hospitality industry.

The number of cash transactions fell by a third last year. Gone are the days of “keep the change” and “take your own”. The tips are down, and we’re feeling the pinch. It’s widely recognised that hospo staff rely on tipping to top up their income – which in most cases is somewhere around minimum wage – leaving them reliant on the kindness of customers rewarding them for their service.

Last month it was announced that restaurant owners will be banned from taking customer tips and service charge payments from workers under legislation being introduced by the government. This comes five years after a ban was first proposed. Under the new law, it will be illegal for employers to divert tips and service charges from restaurant workers.

There will also be requirements to distribute tips fairly and within a specified timescale and employees will have the right to request information on how the tips are distributed, with a written policy being readily available for all to see. The law follows a series of stories about large corporations taking a cut of staff tips including hospitality chains Pizza Express and Giraffe. More recent research has shown that many owners of restaurants, bars and cafes add discretionary service charges to a customer’s bill but keep the money for themselves and the business. In extreme cases establishments were also charging their staff a processing fee for tips paid by credit or with debit card which covered 80% of the tips that staff would receive.

After committing to legislation to protect workers tips and services in 2018, the law is now set to be put before parliament as part of a wider employment bill. Labour Markets Minister Paul Scully says “This 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.”

Many say it’s long overdue, with stories of till shortages being deducted from tips at the end of the night, or staff being forced to hand over their tips to pay for accidental breakages being common amongst the hospitality teams we’ve spoken with recently.

But there’s a bigger issue. Whilst contactless and electronic services like Easytip and TiPJAR are slowly finding their way into venues, hospitality workers have seen their cash tips fall as customers pay by app or card. With the reduction cash payments – and less people carrying cash – staff are feeling the effects.

Speaking to i News in July, Will Campbell from the Ox Club in Leeds said he would walk away with as much as £400 a month in busy periods. Now, he might be lucky to get a fiver. “We still have service charge, which is taxed and added to our salaries, but cash tips have almost completely gone,” he told i. “We used to get about £250 on average a month – it’s split evenly between waiting staff and chefs. Now we get under a tenner. It’s a big cut to us. Hospitality is relatively low paid and we’re dependent on that extra cash. I don’t think people realise.”

With more diners ordering and paying on their phones as a result of apps introduced during the pandemic, is it the case that customers are no longer seeing the value of ‘customer service’ in the way they did before? Is it time to increase the service charge, or introduce mandatory percentage tipping, similar to the model used in the US?

Michelin-starred restaurant Mana in Manchester have taken a different approach. They recently removed their service charge completely. Instead, they increased their tasting menu price to allow workers to be paid more as a salary, rather than relying on the varying generosity of their customers.

It’s a bold move, and many say Mana are brave to try it. “We don’t want to raise our food prices at The Ox Club and then lose covers, because that might hurt the business, and hurt jobs.” said Will. “We all care a lot about the restaurant doing well. Especially now when everything is so uncertain. Going cashless was probably always going to happen – more people are paying digitally now – but it’s more robotic, and we don’t want to lose what makes hospitality great, which is making people happy.”

So is technology the future? Built by hospitality workers for hospitality workers, and now also embraced by musicians and salons, TiPJAR empowers teams to receive and manage their tips via QR codes, NFC and contactless technology. Where staff prefer a collectivised approach, TiPJAR makes a physical terminal that drinkers can tap with a contactless card. Staff can see the bar’s tipping account and check they’re not being short-changed. Their HMRC-cleared system is designed to collect cashless tips transparently and easily, and they have processed over £800k in tips for their 135,000 users since their launch.

Its rival, EasyTip, also uses QR codes printed on customer receipts, but takes a 2.9% transaction fee, as well as allowing customers to leave feedback for the staff member of venue. “It allows staff to regain their earning power,” said its founder, Evgeniy Chuikov.

Perhaps combined with the forthcoming change in legislation, “tapping to tip” may become the new norm after all. We’d love to hear your thoughts!

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