Policy background
The issue of employers in (primarily) the hospitality sector retaining tips, gratuities and service charges ("tips") has been of public and media concern for several years. An earlier concern was the use of tips, gratuities and service charges to meet an employer’s obligation to pay the National Minimum Wage. This concern was addressed in the National Minimum Wage Regulations 1999 (Amendment) Regulations 2009, which included a provision stating that such sums could no longer be used to make up the National Minimum Wage. However, these regulations did not address the wider issues of unfair retention and distribution.
	In 2015, unfair tipping practices became a prominent issue in the media, particularly in relation to major restaurant chains and the percentage of tips being retained by some employers. At this time, evidence found that around two thirds of employers in hospitality were making deductions from staff tips, in some cases of around 10 per cent.
	Some employers in the hospitality sector have more recently improved their tipping practices, including by passing 100 per cent of tips to workers. However, some employers still retain tips which customers have intended to be given to workers as a reward for their hard work and good service, with deductions of 3-5 per cent now more commonplace. There are also concerns in some areas that some changes in practice following the pandemic, such as increased payments by card, have led to more incidents of workers not receiving tips in full.
	At the Conservative Party Conference in October 2018, the Government committed to bringing forward legislation to ensure that employers pass on all tips to workers as part of a wider commitment to end exploitative employment practices and ensure every worker is rewarded fairly for their work.
	A proposed Private Members’ Bill on this topic was introduced by Dean Russell MP in 2021, but was withdrawn in favour of supporting Government legislation.