Recently, the question of what happens to tips given to service-sector staff has been in and out of the news.Back in August 2015, there was significant press coverage about restaurants deducting up to 10% of credit and debit card tips as an "administration fee".Earlier this year, it was reported that restaurants were withholding staff tips to offset the introduction of the National Living Wage.

As it stands, there is no legislation setting out how discretionary service payments should be gathered and distributed amongst staff, or regarding the proportions that should go to employers and workers. A code of practice was introduced in October 2009, and whilst this is detailed it is wholly voluntary.

The Department for Business, Innovation and Skills (BIS) has now published a consultation.It aims to (i) make clear to customers that payments are voluntary; (ii) ensure a fair share is received by workers; and (iii) ensure there is transparency for workers and customers in terms of how the payments are treated.


The consultation invites comments on various proposals, including:

  • Preventing or limiting employer deductions (such asadmin fees), other than for tax or national insurance where appropriate.
  • Updating current guidance for 'troncmasters' (responsible for distributing staff tips), including new guidance on distributing tips paid by card and consulting with all staff before making changes to the distribution of payments.
  • Introducing statutory requirements to regulate troncmasters.
  • Raising the status of the code of practice to make it a 'statutory code' and updating it.

While unions have welcomed BIS' proposals, it remains a possibility that certain staff members may prefer to take more direct action in relation to tips.Back in October 2015, for instance, a large restaurant chain stopped deducting a percentage of tips paid by credit or debit card following a staff demonstration outside one of its restaurants.

The consultation closes on 27 June 2016, and you can access it here.


Kathleen Morrison

Practice Development Lawyer