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The Government's Consultation Finance on Tipping, Gratuities, Cover and Services Charge

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The Government's Consultation Finance on Tipping, Gratuities, Cover and Services Charge

The Government's Consultation Finance on Tipping, Gratuities, Cover and Services Charge

Following concerns over employers' treatment of additional payments to workers in the form of tipping and the transparency of these practices to both consumers and workers alike, the Government has launched a consultation setting out its proposals with the aim of securing a better deal for workers.

As part of the consultation the Government investigated by way of various resources (all set out within the consultation) both worker and consumer perceptions of how tips are treated by their employers. Interestingly, despite the fact that 90% of customers agreed that they leave a tip as a direct response to the service that they receive, under just 5% of these customers could, in general, say that they are aware of what happens to their tip. Over 60% of customers stated that they would like all of the tip to go to the worker. This raises a clear argument for greater transparency as to employer practices in this area, which is a primary focus of the proposals contained throughout the consultation.

The consultation includes a section at Annex C setting out suggested updates to the current voluntary and statutory Code of Practice. This includes a proposed requirement that employers are to maintain readily available written policies for workers, which would include guidance for the employer as to what such a policy should contain. The proposals go further in terms of accountability by proposing that employers are to produce an annual statement for their staff setting out information such as what, if any, deductions are made, how discretionary payments are dealt with and who deals with them, and the difference between cover charges and discretionary payments for service.

It's clear that these proposals are for the benefit of the worker and this is very apparent from the consultation, with proposals set out clearly showing the Government's focus to be on protection of these workers and ensuring they receive the additional remuneration that they are entitled to. Further, the consultation revealed that whilst under 40% of workers are aware of the law in relation to tips, over 90% of their employers are also aware and this demonstrates a real need for employers to be more transparent in how these discretionary payments are dealt with on a day-to-day basis within their business.

To summarise the proposals set out, the Government seeks to:

  1. Ensure transparency to consumers that discretionary payment for service is just that - 'discretionary';
  2. Ensure workers receive a fair share from discretionary payments for service; and
  3. Increase transparency for consumers and workers regarding the treatment of discretionary payments for service.

Proposals for mechanisms to achieve these aims include updating and placing the voluntary Code of Practice on a statutory basis, questioning whether businesses should not be allowed to suggest a particular amount level of discretionary payment for service, and seeking views on how well-managed tronc schemes can be encouraged in order to allocate tips across workers in a way which is agreed upon by the staff.

The closing date for the consultation was 27 June 2016.