Workers in the UK’s hospitality and service industries will now benefit from a law guaranteeing them all the tips they earn, starting this week. The Employment (Allocation of Tips) Act, introduced through a Private Members’ Bill on Tuesday, requires employers to pass on 100% of tips, gratuities, and service charges without deductions.
Under the new law, employees can take legal action through employment tribunals if their employer keeps any part of their tips. “When you tip someone for good service, you expect them to keep all their tip. They did the work – they deserve the reward,” UK Minister for Employment Rights, Justin Madders, said in a press release.
Changes to boost workers’ income
According to the Department for Business and Trade (DBT), the changes are expected to benefit thousands of workers across the UK, with around £200 million now being passed to staff that would otherwise have been withheld by employers. The law is designed to stop the minority of businesses still using unacceptable practices around tipping. Employers caught breaking the new regulations could be fined, and workers will be able to claim back their tips through compensation.
Ben Thomas, CEO of TiPJAR, welcomed the move, saying, “For the first time, millions of workers in the hospitality and service industries can trust that tips employers collect on their behalf will always be passed to them.”
How do other countries handle tipping?
Tipping practices in India
India has no specific laws governing tipping, with gratuities being left to the discretion of customers. Customers often leave cash tips directly for waiters or service staff. These tips are generally kept by the employee and are not taxed, although this practice is informal. However, a survey conducted by Business Standard in July, 2024 revealed that people are tipping significantly less today than they did a few years ago as India pushes for cashless, digital economy. 79.9% of the 2,800 respondents confessed to tipping less, while 20.1% said they had not changed their tipping habits.
Many restaurants include a service charge, but there is no regulation on how these funds should be distributed among staff. “The Central Consumer Protection Authority (CCPA) forbade service charges in 2022. There are court rulings limiting service charges to 10% and directing members of major hospitality associations to retitle the service charge, making it clear that it will be distributed to staff and is optional for customers, meaning you can remove it from your bill,” said Russell A. Stamets, Partner at Circle of Counsels.
“It’s unclear how many establishments actually distribute the service charges collected on behalf of staff, and there hasn’t been any major litigation on the issue,” he said.
“If you want to ensure the service charge goes to staff, one approach is to remove it from your bill and pay it directly to the service staff in cash,” he added.
“While some litigations on the service charge levy are still pending, introducing regulations that define the rights of employees regarding amounts collected through service charges, as well as direct tips from customers, would be a positive step towards addressing this issue comprehensively,” said Minu Dwivedi, Partner at Cyril Amarchand Mangaldas.
United States
In the US, tipping is an integral part of the service industry. Workers can be paid below the federal minimum wage as long as tips make up the difference. Some states, such as California, have stricter rules, with employers required to pay full minimum wage without relying on tips. The Fair Labor Standards Act (FLSA) prevents employers from keeping employees’ tips, except in cases where tip pooling among workers is legal.
Canada
Tipping practices in Canada vary by province, with some, such as Ontario and Quebec, having laws that ensure tips go directly to employees. Ontario’s Fair Workplaces, Better Jobs Act, for instance, prevents employers from withholding any part of a worker’s tips. The minimum wage in Ontario is CAD 17.20 per hour, ensuring that tips are not a worker’s sole source of income.
Australia
Tipping is less common in Australia, where high minimum wages make workers less reliant on gratuities. As of 2024, the minimum wage is AUD 23.23 per hour, with tips being more of a bonus than a necessity for workers.
France
In France, tips are included in the service charge on a bill, known as *service compris*, meaning workers receive fair wages regardless of tipping. Waiters are paid a monthly wage under the French minimum wage (SMIC), currently €11.52 per hour, and enjoy standard benefits like paid vacation and healthcare.
Italy
Similar to France, Italy includes a service charge in restaurant bills. Waiters are paid directly by employers under national labour agreements, and tips are not legally regulated. Monthly wages for waiters in Italy range from €1,200 to €1,600.
First Published: Oct 02 2024 | 3:03 PM IST
