New tipping legislation moves ever closer
24/01/2023
The Employment (Allocation of Tips) Bill has passed its latest, and final, hurdle in the House of Commons and now moves to the House of Lords to be considered by Peers. In the absence of any amendments which may be made by Peers to the draft legislation it now seems inevitable that it will reach the statute book in its current form.
As a brief reminder, the Bill covers all payments of discretionary service charges as well as card tips, cash tips where these are controlled or managed by a business, and tips paid to a third party (as opposed to directly to an employee) using an app where a business has introduced or arranged such a system. It will require all such monies to be paid to staff by the end of the month following the month of receipt with no deductions permitted (including costs such as card commissions and fees), with the exception of tax deductions via payroll.
During a Third Reading debate lasting for almost two hours on 20th January a number of MPs spoke in favour of the Bill, although once again there was no discussion relating to the practical issues regarding payroll dates and agency workers, and only a brief mention of the additional costs facing hospitality businesses both in extra administration (principally relating to the increased record-keeping requirements) and the fees and charges levied on tips and service charges paid by card, which operators will now be forced to meet. Based on an average charge of 2% and the figures contained within the Government’s Impact Assessment these costs could reach £140m per annum across the sector.
These costs were acknowledged by David Johnston, Conservative MP for Wantage, but Mr Johnston then went on to say that whilst he supported hospitality businesses in many areas, he had no sympathy with the argument that retentions for these costs should continue to be permitted.
The MP who initially introduced the Private Members Bill, Dean Russell (Conservative, Watford), gave a little more detail on what will happen next should the Bill receive Royal Assent. The Bill provides for the Secretary of State for Business, Energy & Industrial Strategy (currently Grant Shapps MP) to introduce a Statutory Code of Practice which businesses must “have regard” to, and which Employment Tribunals will use when cases and claims are brought before them to decide if particular arrangements are “fair”. Mr Russell confirmed that there would be a 12 week consultation period with “the hospitality industry and more broadly” following which the Code would itself be subject to confirmation by Parliament, probably by way of a Statutory Instrument.
Mr Russell also confirmed that the Code would not be a “one size fits all model” and that “people who have served and cooked wonderful food, then fairness within that organisation means ensuring that that tip is shared fairly across them all”. This is a sign that Government understands that all contributing staff should be eligible to receive a share and not just servers, as some have demanded.
There is still no actual date for the new legislation to take effect, but given the work still to do (the Bill passing the Lords, consulting on the Code, and then legislating for that Code) this is unlikely to be any earlier than Q4 of 2023. Even then, there may be an implementation period to allow businesses to adjust.
Time, however, will pass quickly and we expect most hospitality businesses will need a period of time to make adjustments to their current arrangements to ensure they are ready and compliant with the new legislative landscape. We encourage you to start thinking this through now and we will be contacting all current clients in the near future to assess and discuss those changes.
We have been expecting this change and planning ahead for it for some time now. As we have communicated previously, we have been working with our partner business Opsyte to develop our unique TroncBox software to be able to provide our clients with the functionality they need to be compliant with the new legislation. We expect to be commencing roll-out of this new software to clients commencing March 2023.
Peter Davies
Managing Director
WMT Troncmaster Services Ltd
