PAY DAY
Major change for millions of workers from TODAY – will you be better off?
New rules will make sure staff receive the tips they earn
AROUND two million workers are set to take home an estimated £200million more of their hard-earned cash thanks to a rule change coming into force today.
A new act will mean that it is unlawful for employers to keep money that workers have earned in tips, gratuities and service charges.
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This will ensure that staff receive all of the tips they have earned.
Currently businesses do not have to follow a compulsory code when it comes to tipping, which means they are not required by law to pass on this money to staff.
The change will affect workers in the hospitality, leisure and services sectors and will apply to any business that allows tipping.
Many hospitality workers rely on tips to top up their income but they are often left powerless if businesses don’t pass on service charges from customers to their staff.
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Currently employees have more control over what happens to cash payments as customers hand them the money directly.
Meanwhile, tips paid by card are handled by the employer, who can deduct card processing fees or other sums without employees knowing.
The law comes after several restaurant chains chose to increase workers’ hourly pay rate by a set amount, no matter how much money was collected in tips during their working hours.
A 2022 survey by industry body UK Hospitality revealed that up to a fifth of businesses were keeping a proportion of the service charge to help cover their own costs.
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The new rules will give workers peace of mind that they are keeping all of their hard-earned money.
It will also ensure that all tips will be paid within one month of being earned.
The amount that employees will benefit from this change will depend on how many tips they earn and how much they are worth.
Employers also cannot alter someone’s salary or hourly rate as tips do not count towards the minimum wage.
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But there are fears that some restaurants which were using tips to supplement staff wages will push up their prices.
The act has taken around eight years to become law after first being proposed under David Cameron’s government.
The law was initially set to come into effect from July this year but it was pushed back.
Under the new rules workers will be able to view their employer’s tipping policy and records.
When was the minimum wage introduced?
THE first National Minimum Wage was put in place in 1998 by the Labour government.
It originally applied to workers aged 22 and over, and there was a separate rate for those aged 18-21.
A separate rate for 16-17-year-olds was introduced in 2004, and in 2010, 21-year-olds became eligible for the adult rate of the National Minimum Wage.
The rate is set by the Government each year based on recommendations by the Low Pay Commission (LPC).
All employers will need to draft a written statutory Code of Practice which sets out how tips will be distributed in a fair and transparent way.
They will also be able to use the new Code as evidence in an employment tribunal.
If found guilty, employers can then be forced to reallocate tips and pay up to £5,000 in compensation for every worker affected.
Former Business and Trade Minister Kevin Hollinrake said it was “not right” for employers to withhold tips from their hard-working employees.
He added that this legislation “reinforces our commitment to legally protecting our low paid workers and ensuring a fair day’s pay for a fair day’s work.”
These measures follow a series of wins for workers after a record uplift in the National Minimum Wage earlier this year.
In April the National Living Wage increased by £1.02 to £11.44 an hour, while the 18-20 Year Old Rate was upped by £1.11 to £8.60 per hour.
In the same month the last government announced greater employment protections for parents and unpaid carers.
Greater redundancy protection for pregnant women and new parents were introduced.
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Existing redundancy protections were also extended to cover pregnancy and a period of time after parents return to work.
In addition, a new entitlement to a week of leave for unpaid carers who are caring for a dependant with a long-term care need was also brought in.
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