For anyone that has had to ask whether the tips go to the staff or the owners, there is good news! Legislation which has been given royal assent but is not yet in force would require employers to provide all tips, gratuities, and service charges to staff directly without deductions.

This follows an estimate that around 3% to 5% of tips are withheld by the employer. While some of these may come from processing fees, which represent around 1% to 3% of the transaction, this new legislation would require employers to gross up the difference to ensure that the employee receives the full amount minus tax and national insurance. The legislation also requires tips to be paid in full to the employee by the end of the month following when they were paid, with the intention assumed to be that they are included in the following month’s pay.

Other requirements include having a written policy for how these payments are handled and recording on a three month rolling basis.

If your business or a business you know are concerned about these changes or any other upcoming amendments to legislation, please contact a member of our team who will be able to assist you.