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Consultation on Tips and Gratuities

The Department for Business, Innovation and Skills (BIS) has published a consultation document in respect of tips and gratuities responding to a call for evidence, which ran from 1 September 2015 to 10 November 2015.

Why is a consultation taking place?

Since 1 October 2009, employers have been prohibited from using tips, gratuities and cover charges to make up payment of the national minimum wage. But tips and gratuities remain a contentious issue. Recent reports suggest that some companies have allegedly reduced the amount of tips being given to workers in order to fund the national living wage and, last year, there was widespread negative publicity over the deduction of administrative fees of 8-10% from customer tips at Pizza Express and other restaurant chains. This is legal and many employers said the charges were a way of covering the cost of pooling and distributing tips.

What is the consultation aiming to do?

In general terms, the policy objectives of the consultation are to make it clear to customers that payments are voluntary, ensure that workers receive a fair share and to increase transparency to workers and customers as to how the payments are treated. Consultation proposals include making it clear on bills that any service charges are voluntary, prohibiting or limiting employers from charging an administrative fee to workers who receive tips and placing the voluntary Code of Practice on a statutory basis. The voluntary Code of Practice was introduced in 2009 to improve the information available on tips, gratuities and service charges and how they differ from cover charges. If the voluntary Code were put on a statutory basis, it could be taken into account in certain tribunal proceedings.

This consultation will close on 27 June 2016.

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