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 on Tuesday in a private member’s bill, requires employers to pass on 100% of tips, gratuities and service charges without deductions.
Under the new law, employees can take legal action in labor courts if their employer keeps any part of their tips. “When you tip someone for good service, you expect them to keep the entire tip. They did the job, they deserve the reward,” UK Workplace Rights Minister Justin Madders said in a press release.
Changes to increase 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 transferred to staff who would have otherwise been retained by employers. The law is designed to stop the minority of businesses that still use unacceptable tipping practices. Employers caught violating the new regulations could be fined and workers could seek compensation for their tips.
Ben Thomas, chief executive of TiPJAR, welcomed the move, saying: “For the first time, millions of workers in the hospitality and service industries can trust that the tips employers collect on their behalf will always be delivered to them.”
How do other countries handle tips?
The new UK law joins a raft of tipping regulations around the world, although practices vary widely. Countries like the United States, Canada, and Australia have different approaches to tips and how they affect wages.
Tipping practices in India
India does not have specific laws regulating tipping, and tipping is at the discretion of customers. Customers often leave cash tips directly to waiters or wait staff. These tips are generally kept by the employee and are not taxable, 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 were a few years ago, as India pushes for a 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) banned service charges in 2022. There are court rulings limiting service charges to 10% and ordering members of major hotel associations to change the title of the service charge, making it clear that it will be distributed to staff and optional for clients, which means you can remove it from your bill,” said Russell A. Stamets, partner at Circle of Counsels.
“It is unclear how many establishments actually distribute service charges collected on behalf of staff, and there has not been any major litigation on the issue,” he said.
“If you want to ensure the service charge goes to the staff, one option is to remove it from your bill and pay it directly to the service staff in cash,” he added.
“Although some litigation is still pending over the service charge tax, the introduction of regulations defining the rights of employees with respect to amounts collected through service charges, as well as direct tips from customers, It would be a positive step to address this problem comprehensively,” Minu said. Dwivedi, Partner, JSA Advocates and Solicitors.
USA
In the United States, tipping is an integral part of the service industry. Workers can be paid less than the federal minimum wage as long as tips make up the difference. Some states, like California, have stricter rules and employers must pay the full minimum wage without relying on tips. The Fair Labor Standards Act (FLSA) prevents employers from keeping employees’ tips, except in cases where it is legal to share tips among workers.
Canada
Tipping practices in Canada vary by province; some, like Ontario and Quebec, have laws that ensure tips go directly to employees. Ontario’s Better Jobs and Fair Workplaces Act, for example, prevents employers from withholding any portion of a worker’s tips. The minimum wage in Ontario is CAD 17.20 per hour, ensuring that tips are not a worker’s only source of income.
Australia
Tipping is less common in Australia, where high minimum wages make workers less reliant on bonuses. Starting in 2024, the minimum wage will be A$23.23 per hour, and tips will be more of a bonus than a necessity for workers.
France
In France, tips are included in the service charge on the bill, known as *service included*, meaning workers receive fair wages regardless of tips. Waiters receive a monthly salary below the French minimum wage (SMIC), currently 11.52 euros per hour, and enjoy standard benefits such as paid vacations and health care.
Italy
Like France, Italy includes a service charge on restaurant bills. Waiters are paid directly by employers under national labor agreements and tips are not legally regulated. The monthly salary of waiters in Italy ranges between 1,200 and 1,600 euros.
First published: October 2, 2024 | 19:33 IS
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