Over Christmas operators hope that business will be buoyant and as a result staff tips should be plentiful, making it a happy time for all.  The industry escaped regulation of tips and service charges just a few years ago but Andrew Percy MP is now trying to introduce a private members bill to do just this.  The industry needs to be aware of the renewed focus on the issue and operators need to remember to abide by the current voluntary Code of Practice to avoid further criticism or legislation.

BIS Code of Practice on Tips

Customers quite rightly like to know what is going to happen to the tip or service charge that they leave.  Following consumer concerns a few years ago, that operators do not distribute all the tips they receive to staff, unions called for regulation on tips.  In a bid to ward off further legislation on the use and distribution of tips the Department for Business, Innovation and Skills published a voluntary code of practice in 2009 which urged operators to give customers and workers information on how they distribute tips so that customers could make an informed choice before leaving a tip.  The Code applies to all hotels, restaurants, bars, gambling and betting outlets and can be accessed here:


Customer Transparency

The Code states that businesses should:

  • Clearly display their policy relating to mandatory and discretionary service charges and tips.  This should cover whether service charges are discretionary or mandatory; whether an admin fee is deducted to cover credit card and banking charges, whether cash and card tips are treated differently and how the money is shared between the business and the workers.
  • Have a process in place to deal with information requests from customers.

Information should be available before a customer decides whether to leave a tip or service charge so it could be printed on the menu, on a wall notice, on the bill or inserted into the bill folder.  Workers should also know where to direct customers to the full written policy on tips. The code sets out some useful examples of acceptable ways to distribute discretionary service charges and cash tips.

Worker Transparency

The Code states that:

  • Workers should understand the business policy on service charges and tips, be able to confidently explain it to customers and know where to direct them for further information.  Workers will need to know how much is deducted by the business and for what (e.g breakages, no shows etc) and whether a tronc system operates.
  • Workers should be fully informed about how tips and service charges are distributed and any deductions that are made.
  • Businesses should seek to reach agreement with workers on any changes in policy.

Information should be given to workers in a written statement and should cover the position during holidays, sick leave etc and on national insurance.

Proposed legislation

Service Charges, Gratuities and Cover Charges (Hospitality, Leisure and Service Sectors) (Statutory Code) Bill 2014-15

Although the text of the draft bill is not yet available it is due to have its second reading in the House of Commons on 6 March 2015.  The Bill would introduce a statutory code (instead of the current voluntary one) for dealing with the distribution of tips and service charges to staff.

Further Information

The British Hospitality Association also has a Code of Practice on discretionary tips and service charges. See: www.bha.org.uk/discretionary-tips-service-changes-code-of-practice/

The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.