Tipping law to come into effect this October amid fears it will pile further pressure on hospitality

As of October, employers will no longer be allowed to hold back service charges from their staff, amid fears the legislation could place further pressure on hospitality businesses.

The Employment Allocation of Tips Act ensures staff in hospitality and other roles receive all of the tips they have earned.

These new measures will apply to England, Scotland and Wales once parliamentary approval has been secured. 

Commenting on Monday, Kevin Hollinrake, business and trade minister said: “It is not right for employers to withhold tips from their hard-working employees. 

“Whether you are cutting hair or pulling a pint, this government’s legislation will protect the tips of workers and give consumers confidence that when they leave a tip, it goes to the hardworking members of staff.”

He added: “The secondary legislation laid today reinforces our commitment to legally protecting our low-paid workers and ensuring a fair day’s pay for a fair day’s work.”

Government officials said the move would put £200m more into workers’ pockets – but restaurants and the wider hospitality sector fear it could add to costs amid a period of high inflation. 

Earlier this month, a London restaurant chain banned customers from paying a tip by card and introduced a 15 per cent “brand” fee instead. 

Ping Pong, which operates five dim sum outlets in the capital, said the new optional charge would go towards “franchise fees and other brand-related expenditure”. 

The fee will replace a 12.5 per cent service charge, 90 per cent of which went to staff.

To compensate, staff at the franchise will be offered a pay rise which the company said would match the earnings they would have received from the service charge distribution.

Art Sagiryan, Ping Pong’s chief executive, told The Times, that the government had “completely ignored the huge costs that are related to operating the new system”.

He said: “Everyone in the industry is waiting to see who does what. There will be people introducing cover charges, there will be people introducing higher bills or menu prices, and we in the interim are trying to decide where we will go.”

It comes amid a challenging period for the hospitality sector, which has been one of the slowest sectors to recover from the pandemic.