Call for Evidence on Tips, Gratuities, Cover and Service Charges

The Government has issued a call for evidence seeking information on how tips, gratuities, cover and service charges are collected and the amount of any deductions made by employers.

Tips and gratuities paid to the employer (for example on credit card as a percentage of the bill), rather than to the worker, are the property of the employer. Whether the employer must pay some or all of those tips to the worker will depend on the individual employment contract.The employer may choose to pass on a proportion to a worker and may also choose to deduct a proportion (for example, as an administration or handling fee). These arrangements should be agreed as part of the worker’s employment contract. 

The call for evidence follows public concern that employers may be deducting excessive amounts from tips and service charges.  The Government wants to hear more about the arrangements employers have with their staff, workers’ experience and whether customers feel informed about what happens to discretionary payments they make.

The Government will consider whether there is any action that can be taken to ensure that employers only withhold an amount representing the cost of administrating credit card and payroll transactions.

The Government will assess the evidence collected and propose any further action to ensure fair and transparent practice.

Responses to the call for evidence are required by 10 November 2015.