New law on tips for restaurants, pubs and more comes into force this week

-Credit: (Image: Ian Cooper/North Wales Live)
-Credit: (Image: Ian Cooper/North Wales Live)


Restaurants, along with taxi firms, hairdressers, hotels, pubs and cafes, may have to increase their prices to cope with a new tip-sharing law that comes into effect on Tuesday, October 1. The new legislation will prohibit these businesses from withholding tips or service charge payments given by customers, whether in cash or card.

Kate Nicholls, 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, warns that "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 for some businesses. And in that scenario, margins will be hit, in some cases fairly drastically."

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Michael Powner, employment partner at Charles Russell Speechlys, highlights the challenges of reaching a fair agreement under the new rules, 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, reports Birmingham Live. He claimed that some were "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 added.

The law aims to increase the income of approximately 2 million waiting staff and other hospitality workers. The government is introducing the law on Tuesday, over eight years after a ban was first proposed.

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