Hospitality | New tip allocation legislation: explained

Hospitality businesses now need to watch out when it comes to tip allocation. If current processes include divvying out the service charge between the business and its staff, they might face penalties. Read on to find out what's changed.

Where did tips go before?

In most restaurants, some or all of the service charge finds its way to those who prepared and served your excellent meal. Strictly though, payment of the service charge is a matter between you and the business owner. Until now, they had no obligation to pass it on. They could deduct for breakages, bank charges, ‘runners’ who don’t pay their bill etc. The only legal obligation was not to use it to discharge their responsibility to pay at least the National Minimum Wage.

Conversely, when you give a waiter a cash tip, that’s between you and that individual. Legally, it’s theirs. Whether they share it with others is up to them.

What’s changed?

Now things are about to change. Concern about what’s been happening to service charge payments prompted new legislation. The new law requires 100% of service charges to be distributed fairly, transparently, and consistently to staff. Even agency workers are included.